[Federal Register Volume 66, Number 91 (Thursday, May 10, 2001)]
[Proposed Rules]
[Pages 23984-24036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11560]
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Part II
Department of Health and Human Services
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Health Care Financing Administration
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42 CFR Parts 410, et al.
Medicare Program, Prospective Payment System and Consolidated Billing
for Skilled Nursing Facilities--Update; Proposed Rule
Federal Register / Vol. 66, No. 91 / Thursday, May 10, 2001 /
Proposed Rules
[[Page 23984]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 410, 411, 413, 424, 482, and 489
[HCFA-1163-P]
RIN 0938-AK47
Medicare Program; Prospective Payment System and Consolidated
Billing for Skilled Nursing Facilities--Update
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule updates the payment rates used under the
prospective payment system (PPS) for skilled nursing facilities (SNFs),
for fiscal year (FY) 2002, as required by statute. Annual updates to
the PPS rates are required by section 1888(e) of the Social Security
Act (the Act), as amended by the Medicare, Medicaid, and SCHIP Balanced
Budget Refinement Act of 1999 (BBRA 1999), and the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA 2000),
relating to Medicare payments and consolidated billing for SNFs. As
part of this annual update, we are rebasing and revising the routine
SNF market basket to reflect 1997 total cost data (the latest available
complete data on the structure of SNF costs), and modifying certain
variables for some of the cost categories. In addition, we propose to
implement the transition of swing-bed facilities to the SNF PPS, as
required by section 1888(e)(7) of the Act.
DATES: We will consider comments if we receive them at the appropriate
address, as provided below, no later than 5 p.m. on July 9, 2001.
ADDRESSES: Mail written comments (one original and three copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-1163-P, P.O. Box 8013,
Baltimore, MD 21244-8013.
If you prefer, you may deliver your written comments (one original
and three copies) to one of the following addresses: Hubert H. Humphrey
Building, Room 443-G, 200 Independence Avenue, SW., Washington, DC
20201, or Health Care Financing Administration, Room C5-15-03, 7500
Security Boulevard, Baltimore, MD 21244-8150.
Comments mailed to those addresses designated for courier delivery
may be delayed and could be considered late. Because of staffing and
resource limitations, we cannot accept comments by facsimile (FAX)
transmission. Please refer to file code HCFA-1163-P on each comment.
Comments received timely will be available for public inspection as
they are received, generally beginning approximately 3 weeks after
publication of this document, in Room C5-12-08 of the Health Care
Financing Administration, 7500 Security Boulevard, Baltimore, Maryland,
Monday through Friday of each week from 8:30 a.m. to 5 p.m. Please call
(410) 786-7197 to make an appointment to view comments.
FOR FURTHER INFORMATION CONTACT:
Dana Burley, (410) 786-4547 or Sheila Lambowitz, (410) 786-7605 (for
information related to the case-mix classification methodology)
John Davis, (410) 786-0008 (for information related to the Wage Index)
Bill Ullman, (410) 786-5667 (for information related to consolidated
billing)
Susan Burris, (410) 786-6655 (for information related to payment)
Sheila Lambowitz, (410) 786-7605 (for information related to swing-bed
providers)
Bill Ullman, (410) 786-5667 or Susan Burris, (410) 786-6655 (for
general information)
SUPPLEMENTARY INFORMATION:
Copies: To order copies of the Federal Register containing this
document, send your request to: New Orders, Superintendent of
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. The cost for
each copy is $9. Please specify the date of the issue requested and
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document at most libraries designated as Federal Depository Libraries
and at many other public and academic libraries throughout the country
that receive the Federal Register.
To assist readers in referencing sections contained in this
document, we are providing the following table of contents.
Table of Contents
I. Background
A. Current System for Payment of Skilled Nursing Facility
Services Under Part A of the Medicare Program
B. Requirements of the Balanced Budget Act of 1997 for Updating
the Prospective Payment System for Skilled Nursing Facilities
C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement
Act of 1999 (BBRA 1999)
D. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA 2000)
E. Skilled Nursing Facility Prospective Payment--General
Overview
1. Payment Provisions--Federal Rates
2. Payment Provisions--Transition Period
F. Skilled Nursing Facility Market Basket Index
II. Update of Payment Rates Under the Prospective Payment System for
Skilled Nursing Facilities
A. Federal Prospective Payment System
1. Costs and Services Covered by the Federal Rates
2. Methodology Used for the Calculation of the Federal Rates
B. Case-Mix Adjustment
C. Wage Index Adjustment to Federal Rates
D. Updates to the Federal Rates
E. Relationship of RUG-III Classification System to Existing
Skilled Nursing Facility Level-of-Care Criteria
F. Three-year Transition Period
G. Example of Computation of Adjusted PPS Rates and SNF Payment
III. The Skilled Nursing Facility Market Basket Index
A. Background
B. Rebasing and Revising the SNF Market Basket
IV. Update Framework
A. The Need for an Update Framework
B. Factors Inherent in SNF Payments per Day
C. Defining Each Factor Inherent in SNF Costs per Day
1. Input Prices
2. Productivity
3. Real Case-Mix per Day
4. Case-Mix Constant Real Output Intensity per Day
D. Applying the Factors that Affect SNF Costs per Day in an
Update Framework
E. Current HCFA Inpatient Hospital PPS and Illustrative SNF PPS
Payment Update Frameworks
F. Additional Conceptual and Data Issues
V. Consolidated Billing
VI. Application of the SNF PPS to SNF Services Furnished by Swing-
Bed Hospitals
A. Current System for Payment of Swing-Bed Facility Services
Under Part A of the Medicare Program
B. Requirement of the Balanced Budget Act of 1997 for Swing-Bed
Facility Services to be Paid under the Prospective Payment System
for Skilled Nursing Facilities
C. Requirements of BBRA 1999 Affecting Swing-Bed Payment and
Eligibility
D. Implications of Swing-Bed Facility Conversion to the SNF PPS
E. SNF PPS Rate Components
F. Implementation of the SNF PPS for Swing-Bed Facilities
G. Use of the Resident Assessment Instrument--Minimum Data Set
(MDS 2.0)
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H. Required Schedule for Completing the MDS
I. RUG-III ``Grouper'' Methodology and Software
J. Applicability of Consolidated Billing to SNF Services
Furnished in Swing-Bed Facilities
K. Costs Associated with Automating the MDS: Preliminary
Estimates
L. Provider Training
VII. Provisions of the Proposed Rule
VIII. Collection of Information Requirements
IX. Regulatory Impact Analysis
A. Background
B. Impact of the Proposed Rule
X. Federalism
Regulation Text
Appendix--Technical Features of the Proposed 1997-based Skilled
Nursing Facility Market Basket Index
I. Synopsis of Structural Changes Adopted in the Proposed Revised
and Rebased 1997 Skilled Nursing Facility Market Basket
II. Methodology for Developing the Cost Category Weights
III. Price Proxies Used to Measure Cost Category Growth
A. Wages and Salaries
B. Employee Benefits
C. All Other Expenses
D. Capital-Related Expenses
In addition, because of the many terms to which we refer by
abbreviation in this proposed rule, we are listing these
abbreviations and their corresponding terms in alphabetical order
below:
ADL Activity of Daily Living
AHE Average Hourly Earnings
ARD Assessment Reference Date
BBA 1997 Balanced Budget Act of 1997, Pub. L. 105-33
BBRA 1999 Medicare, Medicaid and SCHIP Balanced Budget Refinement
Act of 1999, Pub. L. 106-113
BEA (U.S.) Bureau of Economic Analysis
BIPA 2000 The Medicare, Medicaid, and SCHIP Benefits Improvement
and Protection Act of 2000, Pub. L. 106-554
BES (U.S.) Business Expenditures Survey
BLS (U.S.) Bureau of Labor Statistics
CAH Critical Access Hospital
CFR Code of Federal Regulations
CPI Consumer Price Index
CPI-U Consumer Price Index-All Urban Consumers
CPT (Physicians') Current Procedural Terminology
DRG Diagnosis Related Group
ECI Employment Cost Index
FI Fiscal Intermediary
FR Federal Register
FY Fiscal Year
GAO General Accounting Office
HCFA Health Care Financing Administration
HCPCS HCFA Common Procedure Coding System
ICD-9-CM International Classification of Diseases, Ninth Edition,
Clinical Modification
IFC Interim Final Rule with Comment Period
MDS Minimum Data Set
MEDPAR Medicare Provider Analysis and Review File
MIP Medicare Integrity Program
MSA Metropolitan Statistical Area
NECMA New England County Metropolitan Area
OIG Office of the Inspector General
OMRA Other Medicare Required Assessment
PCE Personal Care Expenditures
PPI Producer Price Index
PPS Prospective Payment System
PRM Provider Reimbursement Manual
RAI Resident Assessment Instrument
RAP Resident Assessment Protocol
RAVEN Resident Assessment Validation Entry
RUG Resource Utilization Groups
SCHIP State Children's Health Insurance Program
SNF Skilled Nursing Facility
STM Staff Time Measure
I. Background
On July 31, 2000, we published in the Federal Register (65 FR
46770), a final rule that set forth updates to the payment rates used
under the prospective payment system (PPS) for skilled nursing
facilities (SNFs), for fiscal year (FY) 2001. Annual updates to the PPS
rates are required by section 1888(e) of the Social Security Act (the
Act), as amended by the Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999 (BBRA 1999) and the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000 (BIPA 2000),
relating to Medicare payments and consolidated billing for SNFs.
A. Current System for Payment of Skilled Nursing Facility Services
Under Part A of the Medicare Program
Section 4432 of the Balanced Budget Act of 1997 (BBA 1997) amended
section 1888 of the Act to provide for the implementation of a per diem
PPS for SNFs, covering all costs (routine, ancillary, and capital) of
covered SNF services furnished to beneficiaries under Part A of the
Medicare program, effective for cost reporting periods beginning on or
after July 1, 1998. We propose to update the per diem payment rates for
SNFs, for FY 2002. Major elements of the SNF PPS include:
Rates. Per diem Federal rates were established for urban
and rural areas using allowable costs from FY 1995 cost reports. These
rates also included an estimate of the cost of services that, before
July 1, 1998, had been paid under Part B but furnished to Medicare
beneficiaries in a SNF during a Part A covered stay. The rates were
adjusted annually using a SNF market basket index. Rates were case-mix
adjusted using a classification system (Resource Utilization Groups,
version III (RUG-III)) based on beneficiary assessments (using the
Minimum Data Set (MDS) 2.0). The rates were also adjusted by the
hospital wage index to account for geographic variation in wages. (In
section II.C of this preamble, we discuss the wage index adjustment in
detail, including an examination of the feasibility of developing a
wage index based on SNF-specific wage data.) At this time, data for the
FY 2002 hospital wage index are not yet available; therefore, the index
applied in this proposed rule is the same index used in the July 31,
2000 final rule. A correction notice was published on January 16, 2001
(66 FR 3497) that announced corrections to several of the wage factors.
Additionally, as noted in the July 31, 2000 final rule (65 FR 46770),
section 101 of BBRA 1999 also affects the payment rate. Finally,
sections 311, 312, and 314 of BIPA 2000 affect the Part A PPS payment
rates for SNFs. These new provisions are discussed in detail in section
I.D. of this proposed rule.
Transition. The SNF PPS includes an initial 3-year, phased
transition that blended a facility-specific payment rate with the
Federal case-mix adjusted rate. For each cost reporting period after a
facility migrated to the new system, the facility-specific portion of
the blend decreased and the Federal portion increased in 25 percentage
point increments. For most facilities, the facility-specific rate was
based on allowable costs from FY 1995; however, since the last year of
the transition is FY 2001, all facilities will be paid at the full
Federal rate by the coming fiscal year (FY 2002), for which we are now
proposing updated rates. Therefore, unlike previous years, this
proposed rule does not include adjustment factors related to facility-
specific rates for the coming fiscal year.
Coverage. Medicare's fundamental requirements for SNF
coverage were not changed by BBA 1997; however, because RUG-III
classification is based, in part, on the beneficiary's need for skilled
nursing care and therapy, we have attempted, where possible, to
coordinate claims review procedures with the outputs of beneficiary
assessment and RUG-III classifying activities.
Consolidated Billing. BBA 1997 included a billing
provision that required a SNF to submit consolidated Medicare bills for
its residents for almost all services that are covered under either
Part A or Part B (the statute excluded a small list of services,
primarily those of physicians and certain other types of
practitioners). With the exception of physical therapy, occupational
therapy, and speech-language therapy, section 313 of BIPA 2000 has now
limited the scope of this
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provision to apply only to those services that are furnished during the
course of a resident's covered Part A stay in the SNF, as discussed
later in this proposed rule.
Application of the SNF PPS to SNF services furnished by
swing-bed hospitals. Section 1883 of the Act permits certain small,
rural hospitals to enter into a Medicare swing-bed agreement, under
which the hospital can use its beds to provide either acute or SNF
care, as needed. Part A currently pays for SNF services furnished by
swing-bed hospitals on a cost-related basis. Section 1888(e)(7) of the
Act requires the SNF PPS to encompass these services no earlier than
cost reporting periods beginning on July 1, 1999, and no later than the
end of the SNF PPS transition period described in section 1888(e)(2)(E)
of the Act.
B. Requirements of the Balanced Budget Act of 1997 for Updating the
Prospective Payment System for Skilled Nursing Facilities
Section 1888(e)(4)(H) of the Act requires that we publish in the
Federal Register:
1. The unadjusted Federal per diem rates to be applied to days of
covered SNF services furnished during the FY.
2. The case-mix classification system to be applied with respect to
these services during the FY.
3. The factors to be applied in making the area wage adjustment
with respect to these services.
In the July 30, 1999 final rule (64 FR 41670), we indicated that we
would announce any changes to the guidelines for Medicare level of care
determinations related to modifications in the RUG-III classification
structure.
Along with a number of other revisions discussed later in this
preamble, this proposed rule provides the annual updates to the Federal
rates as mandated by the Act.
C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA 1999)
There were several provisions in BBRA 1999 that resulted in
adjustments to the PPS for SNFs. The provisions were described in the
final rule that we published on July 31, 2000 (65 FR 46770). In
particular, section 101 provided for a temporary, 20 percent increase
in the per diem adjusted payment rates for 15 specified RUG-III groups
(SE3, SE2, SE1, SSC, SSB, SSA, CC2, CC1, CB2, CB1, CA2, CA1, RHC, RMC,
and RMB). Section 101 also included a 4 percent across-the-board
increase in the adjusted Federal per diem payment rates each year for
FYs 2001 and 2002, exclusive of the 20 percent increase.
We included further information on all of the provisions of BBRA
1999 in Program Memorandums A-99-53 and A-99-61 (December 1999), and
Program Memorandum AB-00-18 (March 2000).
D. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA 2000)
The following highlights the major provisions in BIPA 2000 that
result in adjustments to the PPS for SNFs:
Section 203--Exemption of Critical Access Hospital (CAH)
Swing-beds from SNF PPS. This provision exempts swing-beds in CAHs from
section 1888(e)(7) of the Act (as enacted by section 4432(a) of BBA
1997) which applies the SNF PPS to SNF services furnished by swing-bed
hospitals. Accordingly, this provision enables CAHs to be paid for
their swing-bed SNF services on a reasonable cost basis. This provision
is effective with cost reporting periods beginning on or after December
21, 2000, the date of the enactment of this Act. We include further
information on this provision in Program Memorandum A-01-09 (January
16, 2001).
Section 311--Elimination of Reduction in SNF Market Basket
Update in 2001. This provision eliminates the one percent reduction
reflected in the update formula for the Federal rates for FY 2001 that
was required by BBA 1997. In implementing this change, this provision
modifies the schedule and rates according to which Federal per diem
payments are updated. For FY 2002 and FY 2003, the updates would be the
market basket index increase minus 0.5 percentage points. This
provision also provides a special rule that, for purposes of making
payments under the SNF PPS for FY 2001, for the first half of FY 2001
(the period beginning October 1, 2000, and ending March 31, 2001), the
market basket update remains at market basket minus 1, and for the
second half of the fiscal year (the period beginning on April 1, 2001,
and ending on September 30, 2001), the market basket update changes
from market basket minus 1 to market basket plus 1.
In addition, this provision requires the General Accounting Office
(GAO) to submit a report to Congress by July 1, 2002, on the adequacy
of SNF payment rates. It also requires the Secretary to conduct a study
of the different systems for categorizing patients in SNFs in a manner
that accounts for the relative resource utilization of different
patient types, and to submit a report to Congress not later than
January 1, 2005.
Section 312--Increase in Nursing Component of PPS Federal
Rate. This provision requires the Secretary to increase by 16.66
percent the nursing component of the case-mix adjusted Federal rate
specified in the July 31, 2000 final rule (65 FR 46770) for services
furnished on or after April 1, 2001, and before October 1, 2002. This
provision also requires the GAO to conduct an audit of SNF nursing
staff ratios, and to submit a report to Congress by August 1, 2002,
including a recommendation on whether the temporary 16.66 percent
increase in the nursing component should be continued.
Section 313--Application of SNF Consolidated Billing
Requirement Limited to Part A Covered Stays. This provision repeals the
consolidated billing requirement for services (other than physical
therapy, occupational therapy, and speech-language therapy) furnished
to those SNF residents who are in non-covered stays, effective January
1, 2001. It also directs the Secretary to monitor Part B payments for
such services, in order to guard against duplicate billing and the
excessive provision of services.
Section 314--Adjustment of Rehabilitation RUGs to Correct
Anomaly in Payment Rates. For services furnished from April 1, 2001,
until the date that RUG refinements are implemented, this provision
requires the Secretary to increase by 6.7 percent the adjusted Federal
per diem rate for all of the following RUG-III rehabilitation groups:
RUC, RUB, RUA, RVC, RVB, RVA, RHC, RHB, RHA, RMC, RMB, RMA, RLB, and
RLA. This provision amends section 101(b) of BBRA 1999 and supersedes
the 20 percent increase that BBRA 1999 had previously established for
the RHC, RMC, and RMB rehabilitation groups, and corrects the resulting
anomaly under which the payment rates for these particular groups were
actually higher than the rates for some other, more intensive
rehabilitation RUGs. This provision also requires the Office of
Inspector General (OIG) to review whether the RUG payment structure in
effect under BBRA 1999 included incentives for the delivery of
inadequate care and report to the Congress by October 1, 2001.
Section 315--Establishment of Process for Geographic
Reclassification. This provision explicitly permits the Secretary to
establish a geographic reclassification procedure that is specific to
SNFs, for purposes of payment for covered SNF services under the PPS.
The Secretary may not implement this procedure until the
[[Page 23987]]
Secretary has collected data necessary to establish a SNF wage index
that is based on wage data from nursing homes.
We include further information on several of these provisions in
Program Memorandum A-01-08 (January 16, 2001).
E. Skilled Nursing Facility Prospective Payment--General Overview
The Medicare SNF PPS was implemented for cost reporting periods
beginning on or after July 1, 1998. Under the PPS, SNFs are paid
through prospective, case-mix adjusted per diem payment rates
applicable to all covered SNF services. These payment rates cover all
the costs of furnishing covered skilled nursing services (routine,
ancillary, and capital-related costs) other than costs associated with
approved educational activities. Covered SNF services include post-
hospital services for which benefits are provided under Part A and all
items and services that, before July 1, 1998, had been paid under Part
B (other than physician and certain other services specifically
excluded under BBA 1997) but furnished to Medicare beneficiaries in a
SNF during a Part A covered stay. A complete discussion of these
provisions appears in the May 12, 1998 interim final rule (63 FR
26252).
1. Payment Provisions--Federal Rate
The PPS uses per diem Federal payment rates based on mean SNF costs
in a base year updated for inflation to the first effective period of
the PPS. We developed the Federal payment rates using allowable costs
from hospital-based and freestanding SNF cost reports for reporting
periods beginning in FY 1995. The data used in developing the Federal
rates also incorporated an estimate of the amounts that would be
payable under Part B for covered SNF services furnished to individuals
who were receiving Part A covered services in a SNF.
In developing the rates for the initial period, we updated costs to
the first effective year of PPS (15-month period beginning July 1,
1998) using a SNF market basket index, and then standardized for the
costs of facility differences in case-mix and for geographic variations
in wages. Providers that received new provider exemptions from the
routine cost limits were excluded from the database used to compute the
Federal payment rates, as well as costs related to payments for
exceptions to the routine cost limits. In accordance with the formula
prescribed in BBA 1997, we set the Federal rates at a level equal to
the weighted mean of freestanding costs plus 50 percent of the
difference between the freestanding mean and weighted mean of all SNF
costs (hospital-based and freestanding) combined. We computed and
applied separately the payment rates for facilities located in urban
and rural areas. In addition, we adjusted the portion of the Federal
rate attributable to wage-related costs by a wage index.
The Federal rate also incorporates adjustments to account for
facility case-mix, using a classification system that accounts for the
relative resource utilization of different patient types. This
classification system, RUG-III, utilizes beneficiary assessment data
from the Minimum Data Set (MDS) completed by SNFs to assign
beneficiaries to one of 44 groups. The May 12, 1998 interim final rule
(63 FR 26252) included a complete and detailed description of the RUG-
III classification system.
The Federal rates in this proposed rule reflect an update to the
rates in the July 31, 2000 update notice (65 FR 46770) equal to the SNF
market basket index minus 0.5 percent, as well as the elimination of
the 1 percent reduction reflected in the update formula for the FY 2001
payment rates under section 311 of BIPA 2000. According to section 311
of BIPA 2000, for FY 2002, we will update the rate by adjusting the
current rates by the SNF market basket change minus 0.5 percent.
2. Payment Provisions--Transition Period
The SNF PPS includes an initial, phased transition from a facility-
specific rate (which reflects the individual facility's historical cost
experience) to the Federal case-mix adjusted rate. The transition
extends through the facility's first three cost reporting periods under
the PPS, up to and including the one that begins in FY 2001.
Accordingly, starting with cost reporting periods that begin in FY
2002, we will base payments entirely on the Federal rates.
F. Skilled Nursing Facility Market Basket Index
Section 1888(e)(5) of the Act requires the Secretary to establish a
SNF market basket index that reflects changes over time in the prices
of an appropriate mix of goods and services included in the covered SNF
services. The SNF market basket index is used to update the Federal
rates on an annual basis. We are proposing a revised and rebased SNF
market basket index that consists of the most commonly used cost
categories for SNF routine services, ancillary services, and capital-
related expenses. A complete discussion concerning the design and
application of the proposed SNF market basket index is presented in
Section III.
II. Update of Payment Rates Under the Prospective Payment System
for Skilled Nursing Facilities
A. Federal Prospective Payment System
This proposed rule sets forth a schedule of Federal prospective
payment rates applicable to Medicare Part A SNF services beginning
October 1, 2001. The schedule incorporates per diem Federal rates that
provide Part A payment for all costs of services furnished to a
beneficiary in a SNF during a Medicare-covered stay.
1. Costs and Services Covered by the Federal Rates
The Federal rates apply to all costs (routine, ancillary, and
capital-related costs) of covered SNF services other than costs
associated with approved educational activities as defined in
Sec. 413.85. Under section 1888(e)(2) of the Act, covered SNF services
include post-hospital SNF services for which benefits are provided
under Part A (the hospital insurance program), as well as all items and
services (other than those services excluded by statute) that, before
July 1, 1998, were paid under Part B (the supplementary medical
insurance program) but furnished to Medicare beneficiaries in a SNF
during a Part A covered stay. (These excluded service categories are
discussed in greater detail in section V.B.2. of the May 12, 1998
interim final rule (63 FR 26295-97)).
2. Methodology Used for the Calculation of the Federal Rates
The proposed FY 2002 rates would reflect an update using the latest
market basket index minus 0.5 percentage point. The FY 2002 market
basket update factor is 2.9 percent, and subtracting 0.5 percentage
points yields an update of 2.4 percent. For a complete description of
the multi-step process, see the May 12, 1998 interim final rule (63 FR
26252). In accordance with section 101 of BBRA 1999 and section 314 of
BIPA 2000, we have provided for a temporary increase in the per diem
adjusted payment rates of 20 percent for certain specified RUGs, and
6.7 percent for certain others. These temporary increases of 20 percent
and 6.7 percent for certain specified RUGs will continue until
implementation of case-mix refinements, as described in section 101 of
BBRA 1999 and section 314 of BIPA 2000. Also, in accordance with
section 101 of BBRA 1999, we are providing a 4 percent increase in the
adjusted Federal rate for FY 2002. These temporary adjustments (that
is, 20
[[Page 23988]]
percent, 6.7 percent, or 4 percent) are not reflected in the rate
tables (Tables 1, 2, 3, 4, 5, and 6 of this proposed rule). Rather, in
accordance with the statute, they are applied only after all other
adjustments (wage and case-mix) have been made. Further, several
provisions of BIPA 2000 affect the payment rates for SNFs, as described
in the previous section.
We used the SNF market basket to adjust each per diem component of
the Federal rates forward to reflect cost increases occurring between
the midpoint of the Federal FY beginning October 1, 2000, and the
midpoint of the Federal FY beginning October 1, 2001 and ending
September 30, 2002, to which the payment rates apply. In accordance
with section 311 of BIPA 2000, the payment rates are updated for FY
2002 by a factor equal to the annual market basket index percentage
increase minus 0.5 percentage point. However, we note that section 311
of BIPA 2000 has also eliminated the one percent reduction in the
market basket associated with the establishment of the FY 2001 payment
rates. Therefore, in establishing the payment rates for FY 2002, we
would update from the FY 2001 payment rates determined using the full
market basket amount for that year rather than the rates as they
appeared in the July 31, 2000 final rule (65 FR 46770), that were
determined using the one percent reduction. As modified in this manner
to reflect section 311 of BIPA 2000, the FY 2001 rates would be updated
using the latest market basket minus 0.5 percentage point to determine
the payment rates for FY 2002. The nursing case-mix component of the
proposed rates, both urban and rural, includes the 16.66 percent
increase provided by section 312 of BIPA 2000. The rates are further
adjusted by a wage index budget neutrality factor, described later in
this section. Tables 1 and 2 reflect the updated components of the
unadjusted Federal rates (including both the market basket adjustment
and the 16.66 percent increase in the nursing case-mix component).
Table 1.--Unadjusted Federal Rate Per Diem, Urban
----------------------------------------------------------------------------------------------------------------
Nursing-- case- Therapy-- case- Therapy-- non-
Rate component mix mix case-mix Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount............................. $137.89 $89.03 $11.73 $60.33
----------------------------------------------------------------------------------------------------------------
Table 2.--Unadjusted Federal Rate Per Diem, Rural
----------------------------------------------------------------------------------------------------------------
Nursing-- case- Therapy-- case- Therapy-- non-
Rate component mix mix case-mix Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount............................. $131.76 $102.67 $12.53 $61.44
----------------------------------------------------------------------------------------------------------------
B. Case-Mix Adjustment
For FY 2002, we are not proposing to modify the case-mix
classification system. The payment rates set forth in this proposed
rule reflect the continued use of the existing 44-group RUG-III
classification system discussed in the May 12, 1998 interim final rule
(63 FR 26252). Consequently, we will also maintain the add-ons to the
Federal rates for specified RUG-III groups, as required by section 101
of BBRA 1999 and subsequently modified by section 314 of BIPA 2000. The
case-mix adjusted payment rates are listed separately for urban and
rural SNFs in Tables 3 and 4, with the corresponding case-mix index
values. These tables do not reflect the add-ons (that is, 20 percent,
6.7 percent, or 4 percent) provided for in BBRA 1999 and BIPA 2000,
which are applied only after all other adjustments (wage and case-mix)
have been made.
Table 3.--Case-Mix Adjusted Federal Rates and Associated Indexes Urban
----------------------------------------------------------------------------------------------------------------
Non-case
Nursing Therapy Nursing Therapy mix Non-case
RUG III category index index component component therapy mix Total rate
comp. component
----------------------------------------------------------------------------------------------------------------
RUC......................... 1.30 2.25 179.26 200.32 .......... 60.33 439.91
RUB......................... 0.95 2.25 131.00 200.32 .......... 60.33 391.65
RUA......................... 0.78 2.25 107.55 200.32 .......... 60.33 368.20
RVC......................... 1.13 1.41 155.82 125.53 .......... 60.33 341.68
RVB......................... 1.04 1.41 143.41 125.53 .......... 60.33 329.27
RVA......................... 0.81 1.41 111.69 125.53 .......... 60.33 297.55
RHC......................... 1.26 0.94 173.74 83.69 .......... 60.33 317.76
RHB......................... 1.06 0.94 146.16 83.69 .......... 60.33 290.18
RHA......................... 0.87 0.94 119.96 83.69 .......... 60.33 263.98
RMC......................... 1.35 0.77 186.15 68.55 .......... 60.33 315.03
RMB......................... 1.09 0.77 150.30 68.55 .......... 60.33 279.18
RMA......................... 0.96 0.77 132.37 68.55 .......... 60.33 261.25
RLB......................... 1.11 0.43 153.06 38.28 .......... 60.33 251.67
RLA......................... 0.80 0.43 110.31 38.28 .......... 60.33 208.92
SE3......................... 1.70 .......... 234.41 .......... 11.73 60.33 306.47
SE2......................... 1.39 .......... 191.67 .......... 11.73 60.33 263.73
SE1......................... 1.17 .......... 161.33 .......... 11.73 60.33 233.39
SSC......................... 1.13 .......... 155.82 .......... 11.73 60.33 227.88
SSB......................... 1.05 .......... 144.78 .......... 11.73 60.33 216.84
SSA......................... 1.01 .......... 139.27 .......... 11.73 60.33 211.33
CC2......................... 1.12 .......... 154.44 .......... 11.73 60.33 226.50
[[Page 23989]]
CC1......................... 0.99 .......... 136.51 .......... 11.73 60.33 208.57
CB2......................... 0.91 .......... 125.48 .......... 11.73 60.33 197.54
CB1......................... 0.84 .......... 115.83 .......... 11.73 60.33 187.89
CA2......................... 0.83 .......... 114.45 .......... 11.73 60.33 186.51
CA1......................... 0.75 .......... 103.42 .......... 11.73 60.33 175.48
IB2......................... 0.69 .......... 95.14 .......... 11.73 60.33 167.20
IB1......................... 0.67 .......... 92.39 .......... 11.73 60.33 164.45
IA2......................... 0.57 .......... 78.60 .......... 11.73 60.33 150.66
IA1......................... 0.53 .......... 73.08 .......... 11.73 60.33 145.14
BB2......................... 0.68 .......... 93.77 .......... 11.73 60.33 165.83
BB1......................... 0.65 .......... 89.63 .......... 11.73 60.33 161.69
BA2......................... 0.56 .......... 77.22 .......... 11.73 60.33 149.28
BA1......................... 0.48 .......... 66.19 .......... 11.73 60.33 138.25
PE2......................... 0.79 .......... 108.93 .......... 11.73 60.33 180.99
PE1......................... 0.77 .......... 106.18 .......... 11.73 60.33 178.24
PD2......................... 0.72 .......... 99.28 .......... 11.73 60.33 171.34
PD1......................... 0.70 .......... 96.52 .......... 11.73 60.33 168.58
PC2......................... 0.65 .......... 89.63 .......... 11.73 60.33 161.69
PC1......................... 0.64 .......... 88.25 .......... 11.73 60.33 160.31
PB2......................... 0.51 .......... 70.32 .......... 11.73 60.33 142.38
PB1......................... 0.50 .......... 68.95 .......... 11.73 60.33 141.01
PA2......................... 0.49 .......... 67.57 .......... 11.73 60.33 139.63
PA1......................... 0.46 .......... 63.43 .......... 11.73 60.33 135.49
----------------------------------------------------------------------------------------------------------------
Table 4.--Case-Mix Adjusted Federal Rates and Associated Indexes, Rural
----------------------------------------------------------------------------------------------------------------
Non-case
Nursing Therapy Nursing Therapy mix Non-case
RUG III category index index component component therapy mix Total rate
comp component
----------------------------------------------------------------------------------------------------------------
RUC......................... 1.30 2.25 171.29 231.01 .......... 61.44 463.74
RUB......................... 0.95 2.25 125.17 231.01 .......... 61.44 417.62
RUA......................... 0.78 2.25 102.77 231.01 .......... 61.44 395.22
RVC......................... 1.13 1.41 148.89 144.76 .......... 61.44 355.09
RVB......................... 1.04 1.41 137.03 144.76 .......... 61.44 343.23
RVA......................... 0.81 1.41 106.73 144.76 .......... 61.44 312.93
RHC......................... 1.26 0.94 166.02 96.51 .......... 61.44 323.97
RHB......................... 1.06 0.94 139.67 96.51 .......... 61.44 297.62
RHA......................... 0.87 0.94 114.63 96.51 .......... 61.44 272.58
RMC......................... 1.35 0.77 177.88 79.06 .......... 61.44 318.38
RMB......................... 1.09 0.77 143.62 79.06 .......... 61.44 284.12
RMA......................... 0.96 0.77 126.49 79.06 .......... 61.44 266.99
RLB......................... 1.11 0.43 146.25 44.15 .......... 61.44 251.84
RLA......................... 0.80 0.43 105.41 44.15 .......... 61.44 211.00
SE3......................... 1.70 .......... 223.99 .......... 12.53 61.44 297.96
SE2......................... 1.39 .......... 183.15 .......... 12.53 61.44 257.12
SE1......................... 1.17 .......... 154.16 .......... 12.53 61.44 228.13
SSC......................... 1.13 .......... 148.89 .......... 12.53 61.44 222.86
SSB......................... 1.05 .......... 138.35 .......... 12.53 61.44 212.32
SSA......................... 1.01 .......... 133.08 .......... 12.53 61.44 207.05
CC2......................... 1.12 .......... 147.57 .......... 12.53 61.44 221.54
CC1......................... 0.99 .......... 130.44 .......... 12.53 61.44 204.41
CB2......................... 0.91 .......... 119.90 .......... 12.53 61.44 193.87
CB1......................... 0.84 .......... 110.68 .......... 12.53 61.44 184.65
CA2......................... 0.83 .......... 109.36 .......... 12.53 61.44 183.33
CA1......................... 0.75 .......... 98.82 .......... 12.53 61.44 172.79
IB2......................... 0.69 .......... 90.91 .......... 12.53 61.44 164.88
IB1......................... 0.67 .......... 88.28 .......... 12.53 61.44 162.25
IA2......................... 0.57 .......... 75.10 .......... 12.53 61.44 149.07
IA1......................... 0.53 .......... 69.83 .......... 12.53 61.44 143.80
BB2......................... 0.68 .......... 89.60 .......... 12.53 61.44 163.57
BB1......................... 0.65 .......... 85.64 .......... 12.53 61.44 159.61
BA2......................... 0.56 .......... 73.79 .......... 12.53 61.44 147.76
BA1......................... 0.48 .......... 63.24 .......... 12.53 61.44 137.21
PE2......................... 0.79 .......... 104.09 .......... 12.53 61.44 178.06
PE1......................... 0.77 .......... 101.46 .......... 12.53 61.44 175.43
PD2......................... 0.72 .......... 94.87 .......... 12.53 61.44 168.84
PD1......................... 0.70 .......... 92.23 .......... 12.53 61.44 166.20
[[Page 23990]]
PC2......................... 0.65 .......... 85.64 .......... 12.53 61.44 159.61
PC1......................... 0.64 .......... 84.33 .......... 12.53 61.44 158.30
PB2......................... 0.51 .......... 67.20 .......... 12.53 61.44 141.17
PB1......................... 0.50 .......... 65.88 .......... 12.53 61.44 139.85
PA2......................... 0.49 .......... 64.56 .......... 12.53 61.44 138.53
PA1......................... 0.46 .......... 60.61 .......... 12.53 61.44 134.58
----------------------------------------------------------------------------------------------------------------
We remain committed to efforts to monitor the RUG-III
classification system and to pursue refinements in SNF payment. In the
proposed rule associated with the FY 2001 SNF PPS update published
April 10, 2000 (65 FR 19188), we had discussed options for refinements
to the RUG-III classification system to account more accurately for the
services provided to medically complex patients. The refinement
approaches discussed had a particular focus on ancillary services other
than rehabilitation (physical, occupational, and speech-language
therapy), such as prescription drugs and respiratory therapy. We
described our ongoing research and analyses in this area and shared the
initial results that we proposed be incorporated into the Medicare SNF
PPS system effective October 1, 2000. In that proposed rule, we
cautioned that the proposed RUG-III refinements were based on limited
data from seven states from periods prior to the implementation of the
SNF PPS (1996 and 1997). Consequently, we indicated our plan to
validate the findings using more current data from a broad national
sample before issuing a final rule.
As discussed in the final rule published on July 31, 2000 (65 FR
46770), we conducted the validation analyses to determine the
predictive power of the proposed case-mix models in identifying
variations in non-therapy ancillary costs, using national data from a
current period (that is, after the implementation of the SNF PPS).
Based on these analyses, we determined that the refinement models
developed using the pre-PPS sample were not effective in predicting
resource use in the post-PPS environment. We identified several
important variations in the post-PPS volume and distribution of
beneficiaries and ancillary services costs using the 1999 national
data, which appear to have affected the performance of the case-mix
refinement models described in the proposed rule. We noted our belief
that the introduction of the PPS and consolidated billing provisions
for covered Part A SNF stays may have caused changes in facility
practice patterns and billing. These changes, as well as the use of the
broader national data sample, likely diminished the effectiveness of
the models. Accordingly, in the final rule, we indicated our decision
not to proceed with the implementation of case-mix refinements for FY
2001.
However, this decision did not in any way reflect a lack of
commitment to pursuing appropriate case-mix refinements, and we remain
dedicated to achieving this objective as quickly as possible. While the
language in section 101 of BBRA 1999 does not directly mandate that we
make case-mix refinements, we believe it nonetheless reflects a clear
expectation that refinements will occur, by establishing payment
adjustments that will expire upon the implementation of case-mix
refinements, and by characterizing those adjustments as temporary.
Accordingly, we are continuing our active efforts in this area, with
the expectation that we will, over the next 12 months, develop case-mix
refinements.
The inability of the specific case-mix refinement models based on a
pre-PPS study sample (as described in the FY 2001 proposed rule) to
explain behavior adequately in the post-PPS data does not warrant the
conclusion that further efforts to improve the payment system's ability
to allocate payments based on expected ancillary use would be
unproductive. In fact, we believe there may well be the potential to
establish meaningful refinements in the short term based on the results
of a deliberate, comprehensive analysis using the extensive MDS 2.0,
claims, and other administrative data now available. Moreover, this
research will also provide an important foundation for a longer term
analysis which seeks to identify alternative classification approaches
in the SNF setting. The analysis we propose to conduct will be included
in the report to Congress mandated by section 311 of BIPA 2000. This
section requires us to submit the report no later than January 1, 2005.
This work may also support a longer term goal, supported by HCFA and
MedPAC, of developing more integrated approaches for the payment and
delivery system for Medicare post acute services generally.
Therefore, we are currently proceeding with efforts to develop
refinements to the RUG-III system, and are in the process of initiating
a research contract in this area. We plan to look broadly for
alternative refinement approaches that will improve the payment
system's ability to account for the variation in resources associated
with SNF patients generally, as well as medically complex patients and
non-therapy ancillary services more specifically. This may include
further analysis to develop a non-therapy ancillary index, similar to
that proposed in the FY 2001 proposed rule, as well as exploration of
other potential refinement approaches that could utilize information
related to service use, function, diagnosis, and co-morbidities. In
exploring possible refinement approaches, it is necessary to consider
the potential effect of the refinements on aggregate SNF payments, as
well as on access to and quality of care. In addition, we recognize the
utility of using administrative data (such as claims) in the
construction of the case-mix indexes and may, as MedPAC has recommended
in the past, examine the potential for using this data to accomplish
the tasks we are undertaking. Such an approach would facilitate annual
updates to the case-mix indexes similar to the inpatient hospital PPS.
In continuing this research, we will carefully consider the comments we
received pursuant to the FY 2001 proposed rule. In addition, we
specifically solicit comments in this proposed rule regarding possible
approaches to refining the case-mix system.
While we recognize the need to seek improvements in the payment
system, we are not aware of any substantive findings that demonstrate,
as has been
[[Page 23991]]
suggested at recent MedPAC meetings, that the RUG-III system has proven
to be unworkable. In fact, several recent reports indicate that quality
and access do not appear to be impaired. This may be more a function of
overall revenues available to SNFs under the PPS, especially
considering recent increases in funding under BBRA 1999 and BIPA 2000.
Even though they do not affect the current case-mix classification
structure, a number of these recent payment increases are nonetheless
intended to ensure that facilities continue to be paid appropriately
until RUG refinements can be made. We also note that it may be
premature to make assumptions regarding the effect of case-mix on
provider behavior based on currently available data (which, at this
point, still reflect only payments made during the transition period
when SNFs received a blend of the Federal rate and facility-specific
rate), since provider behavior may change significantly once payment is
made under the fully case-mix adjusted Federal rates.
Further, it is worth noting that in research conducted to support
the implementation of the SNF PPS, the RUG-III case-mix system was
shown to predict approximately 55 percent of the overall variation in
nursing and therapy staff time costs across total facility population
(that includes both Medicare and Medicaid, as well as other patients).
The level of variance explanation is somewhat less across the Medicare
population due to its greater homogeneity. While we have not measured
this directly, an examination of the 1997 staff time data focusing on
patients in Medicare certified units that specialize in medically
complex care or intensive rehabilitation found that RUG-III predicted
41 percent of nursing and rehabilitation staff time costs across total
facility population (which includes Medicare, Medicaid, and private pay
patients). We believe that it continues to be highly effective in this
area. While we have found that pharmacy costs are correlated somewhat
with the nursing case-mix indexes in RUG-III, it is important to note
that such costs are, by and large, difficult to account for in case-mix
systems because drug costs do not necessarily follow physical
condition, resource use, or functional and clinical pathways.
We look forward to addressing this important issue through the
study of alternative case-mix systems required under BIPA 2000, which
provides an opportunity for a deliberate analytical approach to the
question of how best to refine the current classification system or to
redirect Medicare's payment system to produce more equitable payments
for providers and best support access and quality of care for Medicare
beneficiaries. Similarly, we look forward to the study required under
section 545 of BIPA 2000 (required to be completed by January 1, 2005),
which requires us to submit a report on the development of standard
instruments for the assessment of the health and functional status of
patients. We also invite comments on possible approaches to refining
the current case-mix classification system, as well as on identifying
and studying alternatives to the current system. With regard to the MDS
2.0, we continue to believe that the MDS is an accurate and effective
assessment tool, which meets program objectives related to its major
purposes of supporting quality of care and providing patient status and
treatment information needed to support payment. We are currently
engaged in a number of activities that support accurate completion of
the MDS. These include expanded provider training, clearer definitions
of certain MDS elements and coding instructions, and funding of program
safeguard contractor activities to undertake auditing and verification
of the MDS. We also note our concern that the OIG's recent reports
related to the accuracy of the MDS contained a number of methodological
limitations (as acknowledged in the reports) that limit their utility
for drawing conclusions about the MDS.
However, we recognize the increased financial incentives that BIPA
creates for the rehabilitation categories and the potential for
upcoding under the SNF PPS to gain higher payments. In fact, the
potential for inappropriate upcoding exists in any prospective payment
system that uses coding of clinical information as the basis for
determining payment amounts due to providers, and the SNF PPS (which
bases payment amounts on the clinical information entered on the MDS)
is no exception. In this context, we note that fiscal intermediaries
(FIs) will continue reviewing SNF PPS bills. As with current practice,
the FIs will focus on identifying instances in which inappropriate
services were provided or where the beneficiary did not meet the
requirements for Medicare Part A coverage in an SNF. As part of this
review, the MDS and the medical record is assessed to verify that the
reported information supports the RUG category billed.
We believe that the practice of FIs using a data driven approach to
focus medical review efforts will help address the incentive for
upcoding. Once bills have been targeted for review, the FIs will
identify instances in which inappropriate services were provided or
where the beneficiary did not meet the requirements for Medicare Part A
coverage in a SNF. As part of this review, the medical record (which
includes the MDS) is assessed to verify that the reported information
supports the RUG category billed.
To lend further support to program safeguard efforts, we are in the
process of awarding a contract to a Medicare Integrity Program (MIP)
contractor to provide an ongoing centralized data surveillance process
to assess the accuracy and reliability of MDS data particular to the
health care furnished by SNFs, and payment for these services. This
includes ensuring appropriate payment and payment denial decisions. The
findings will produce evidence for further actions at national,
regional, and State levels in addressing concerns in the areas of
program integrity, beneficiary health and safety, and quality
improvement. The contractor is also expected to perform monitoring and
data analyses to determine if there are variations over time in the
case-mix intensity, and whether those differences represent changes in
actual or real case status of beneficiaries rather than changes that
reflect improper provider behavior. Through the MIP contractor and the
FIs, we will address instances of improper billing through recoupment
of improper payments, intensified reviews, and provider education.
Further, in the context of our ongoing efforts to ensure accurate
payment for appropriate care, we note a situation regarding
rehabilitation therapy that is being provided in SNFs in a manner that
conflicts with Medicare coverage guidelines. This issue involves
providers that refuse to employ therapists who are unwilling to
perform, on a routine basis, concurrent therapy. Concurrent therapy is
the practice of one professional therapist treating more than one
Medicare beneficiary at a time--in some cases, many more than one
individual at a time.
Concurrent therapy is distinguished from group therapy, because all
participants in group therapy are working on some common skill
development and the ratio of participants to therapist may be no higher
than 4 to 1. In addition, in the July 30, 1999 SNF PPS final rule (64
FR 41662), we specified that the minutes of group therapy received by
the beneficiary may account for no more than 25 percent of the therapy
(per discipline) received in a 7 day period. By contrast, a beneficiary
who is receiving concurrent therapy with one or more other
beneficiaries likely is not
[[Page 23992]]
receiving services that relate to those needed by any of the other
participants. Although each beneficiary may be receiving care that is
prescribed in his individual plan of treatment, it is not being
delivered according to Medicare coverage guidelines; that is, the
therapy is not being provided individually, and it is unlikely that the
services being delivered are at the complex skill level required for
coverage by Medicare.
The Medicare SNF benefit provides coverage of therapy services only
when the services are of such a level of complexity and sophistication
(or the beneficiary's condition is such) that the services can be
safely and effectively performed only by or under the supervision of a
qualified professional therapist. Therapy services that are
concurrently being delivered by one treating therapist to many
beneficiaries would not appear to meet these criteria. If the therapist
or therapy assistant can provide distinct services to several
beneficiaries at once, then it is unlikely that the services are
sufficiently complex and sophisticated to qualify for coverage under
the Medicare guidelines.
We note that there have always been isolated instances in which a
professional therapist has been allowed to have some overlap in the
time of concluding treatment to one individual and the time of
commencing the treatment of another, even to the point of briefly
providing therapy concurrently in certain cases. However, the key
principle here is that Medicare relies on the professional judgment of
the therapist to determine when, based on the complexity of the
services to be delivered and the condition of the beneficiary, it is
appropriate to deliver care to more than one beneficiary at the same
time. Our concern now is that in some areas of the country, concurrent
therapy is becoming a standard practice rather than the exception, and
is being dictated by facility management personnel rather than
according to the professional judgment of the therapists involved.
We believe that it is important to heighten the SNF and therapy
industries' awareness of the applicable Medicare policy in this regard.
Medicare policy has not, until now, specifically addressed coverage of
skilled rehabilitation therapy in situations in which a single
professional therapist (or therapy assistant under the supervision of
the professional therapist) simultaneously provides different
treatments to multiple beneficiaries. As noted above, we have relied on
the professional therapist's judgment as to when it is appropriate for
an individual therapist to provide services to more than one
beneficiary. We now wish to advise the providers of care of our concern
about the potentially adverse effect of this practice on the quality of
the therapy provided to beneficiaries in Part A SNF stays, as well as
our concern about the implications of making payments in such
situations. We solicit public comments regarding the scope and
magnitude of this problem, and possible approaches for addressing this
issue.
C. Wage Index Adjustment to Federal Rates
Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the
Federal rates to account for differences in area wage levels, using an
appropriate wage index, as determined by the Secretary. Section 315 of
BIPA 2000 authorizes the Secretary to establish a reclassification
system for SNFs, similar to the hospital methodology. This
reclassification system cannot be implemented until the Secretary has
collected data necessary to establish an area wage index for SNFs based
on wage data from such facilities. Pursuant to section 106(a) of the
Social Security Act Amendments of 1994 (P.L. 103-432), the Secretary
was directed to begin to collect data on employee compensation and paid
hours of employment in SNFs for the purpose of constructing a SNF wage
index. Since the inception of a PPS for SNFs, we have utilized hospital
wage data in developing a wage index to be applied to SNFs.
The computation of the proposed wage index is similar to past years
because we incorporate the latest data and methodology used to
construct the hospital wage index (see the discussion in the May 12,
1998 interim final rule (63 FR 26274)). The wage index adjustment is
applied to the proposed labor-related portion of the Federal rate,
which is 75.374 percent of the total rate. This percentage reflects the
labor-related relative importance for FY 2002. The labor-related
relative importance is calculated from the SNF market basket, and
approximates the labor-related portion of the total costs after taking
into account historical and projected price changes between the base
year and FY 2002. The price proxies that move the different cost
categories in the market basket do not necessarily change at the same
rate, and the relative importance captures these changes. Accordingly,
the relative importance figure more closely reflects the cost share
weights for FY 2002 than the base year weights from the SNF market
basket.
We calculate the labor-related relative importance for FY 2002 in
four steps. First, we compute the FY 2002 price index level for the
total market basket and each cost category of the market basket.
Second, we calculate a ratio for each cost category by dividing the FY
2002 price index level for that cost category by the total market
basket price index level. Third, we determine the FY 2002 relative
importance for each cost category by multiplying this ratio by the base
year (FY 1997) weight. Finally, we sum the FY 2002 relative importance
for each of the labor-related cost categories (that is, wages and
salaries; employee benefits; nonmedical professional fees; labor-
intensive services; and, capital-related) to produce the FY 2002 labor-
related relative importance. Tables 5 and 6 show the Federal rates by
labor-related and non-labor-related components.
Table 5.--Case-Mix Adjusted Federal Rates for Urban SNFs by Labor and
Non-Labor Component
------------------------------------------------------------------------
Non-
RUG III category Total Labor labor
rate portion portion
------------------------------------------------------------------------
RUC....................................... 439.91 331.58 108.33
RUB....................................... 391.65 295.20 96.45
RUA....................................... 368.20 277.53 90.67
RVC....................................... 341.68 257.54 84.14
RVB....................................... 329.27 248.18 81.09
RVA....................................... 297.55 224.28 73.27
RHC....................................... 317.76 239.51 78.25
RHB....................................... 290.18 218.72 71.46
RHA....................................... 263.98 198.97 65.01
RMC....................................... 315.03 237.45 77.58
RMB....................................... 279.18 210.43 68.75
RMA....................................... 261.25 196.91 64.34
RLB....................................... 251.67 189.69 61.98
RLA....................................... 208.92 157.47 51.45
SE3....................................... 306.47 231.00 75.47
SE2....................................... 263.73 198.78 64.95
SE1....................................... 233.39 175.92 57.47
SSC....................................... 227.88 171.76 56.12
SSB....................................... 216.84 163.44 53.40
SSA....................................... 211.33 159.29 52.04
CC2....................................... 226.50 170.72 55.78
CC1....................................... 208.57 157.21 51.36
CB2....................................... 197.54 148.89 48.65
CB1....................................... 187.89 141.62 46.27
CA2....................................... 186.51 140.58 45.93
CA1....................................... 175.48 132.27 43.21
IB2....................................... 167.20 126.03 41.17
IB1....................................... 164.45 123.95 40.50
IA2....................................... 150.66 113.56 37.10
IA1....................................... 145.14 109.40 35.74
BB2....................................... 165.83 124.99 40.84
BB1....................................... 161.69 121.87 39.82
BA2....................................... 149.28 112.52 36.76
BA1....................................... 138.25 704.20 34.05
PE2....................................... 780.99 136.42 44.57
PE1....................................... 178.24 134.35 43.89
PD2....................................... 171.34 129.15 42.19
PD1....................................... 168.58 127.07 41.51
PC2....................................... 161.69 121.87 39.82
PC1....................................... 160.31 120.83 39.48
PB2....................................... 142.38 107.32 35.06
PB1....................................... 141.01 106.28 34.73
[[Page 23993]]
PA2....................................... 139.63 105.24 34.39
PA1....................................... 135.49 102.12 33.37
------------------------------------------------------------------------
Table 6.--Case-Mix Adjusted Federal Rates for Rural SNFs by Labor and
Non-Labor Component
------------------------------------------------------------------------
Non-
RUG III category Total Labor labor
rate portion portion
------------------------------------------------------------------------
RUC....................................... 463.74 349.54 114.20
RUB....................................... 417.62 314.78 102.84
RUA....................................... 395.22 297.89 97.33
RVC....................................... 355.09 267.65 87.44
RVB....................................... 343.23 258.71 84.52
RVA....................................... 312.93 235.87 77.06
RHC....................................... 323.97 244.19 79.78
RHB....................................... 297.62 224.33 73.29
RHA....................................... 272.58 205.45 67.13
RMC....................................... 318.38 239.98 78.40
RMB....................................... 284.12 214.15 69.97
RMA....................................... 266.99 201.24 65.75
RLB....................................... 251.84 189.82 62.02
RLA....................................... 211.00 159.04 51.96
SE3....................................... 297.96 224.58 73.38
SE2....................................... 257.12 193.80 63.32
SE1....................................... 228.13 171.95 56.18
SSC....................................... 222.86 167.98 54.88
SSB....................................... 212.32 160.03 52.29
SSA....................................... 207.05 156.06 50.99
CC2....................................... 221.54 166.98 54.56
CC1....................................... 204.41 154.07 50.34
CB2....................................... 193.87 146.13 47.74
CB1....................................... 184.65 139.18 45.47
CA2....................................... 183.33 138.18 45.15
CA1....................................... 172.79 130.24 42.55
IB2....................................... 164.88 124.28 40.60
IB1....................................... 162.25 122.29 39.96
IA2....................................... 149.07 112.36 36.71
IA1....................................... 143.80 108.39 35.41
BB2....................................... 163.57 123.29 40.28
BB1....................................... 159.61 120.30 39.31
BA2....................................... 147.76 111.37 36.39
BA1....................................... 137.21 103.42 33.79
PE2....................................... 178.06 134.21 43.85
PE1....................................... 175.43 132.23 43.20
PD2....................................... 168.84 127.26 41.58
PD1....................................... 166.20 125.27 40.93
PC2....................................... 159.61 120.30 39.31
PC1....................................... 158.30 119.32 38.98
PB2....................................... 141.17 106.41 34.76
PB1....................................... 139.85 105.41 34.44
PA2....................................... 138.53 104.42 34.11
PA1....................................... 134.58 101.44 33.14
------------------------------------------------------------------------
Section 1888(e)(4)(G)(ii) of the Act also requires that the
application of this wage index be made in a manner that does not result
in aggregate payments that are greater or lesser than would otherwise
be made in the absence of the wage adjustment. In this fourth PPS year
(Federal rates effective October 1, 2001), we are updating the wage
index applicable to SNF payments using the most recent hospital wage
data and applying an adjustment to fulfill the budget neutrality
requirement. This requirement will be met by multiplying each of the
components of the unadjusted Federal rates by a factor equal to the
ratio of the volume weighted mean wage adjustment factor (using the
wage index from the previous year) to the volume weighted mean wage
adjustment factor, using the wage index for the FY beginning October 1,
2001. The same volume weights are used in both the numerator and
denominator and will be derived from 1997 Medicare Provider Analysis
and Review File (MEDPAR) data. The wage adjustment factor used in this
calculation is defined as the labor share of the rate component
multiplied by the wage index plus the non-labor share. The proposed
budget neutrality factor for FY 2002 is .99939.
Over the past few years, we have received many comments asking that
we evaluate a SNF-specific wage index, which would be based solely on
wage and hourly data from SNFs. To develop this analysis, a schedule
was added to the cost report to gather wage and hourly data from each
SNF. In this proposed rule we are publishing a wage index prototype
based on SNF data, along with the wage index based on the hospital wage
data that was used in the FY 2001 final rule published July 31, 2000 in
the Federal Register (65 FR 46770).
The wage index computations for the SNF prototype were done in the
same manner as the current wage index based on hospital data, except
that SNFs use one of three cost reports to report their data:
Freestanding SNFs use the HCFA-2540, Worksheet S-3; hospital-based SNFs
use the HCFA-2552, Worksheet S-3; and low-volume SNF providers use the
HCFA-2540-S, Worksheet S-3.
The SNF-specific wage indexes illustrated in Table 7 include the
following categories of data associated with costs paid under the SNF
PPS:
Salaries and hours from freestanding and hospital-based
SNFs.
Home office costs and hours.
Certain contract labor costs and hours.
Wage-related costs.
Consistent with the wage index methodology used in the development
of the hospital wage index, the wage indexes published here would also
continue to exclude the direct and overhead costs of salaries and hours
for services not paid through the SNF PPS, such as home health
services, and other sub-provider components that are not subject to the
PPS. In addition, as is done in computing the hospital wage index, we
would phase out costs associated with graduate medical education (GME)
(teaching physicians and residents). For purposes of illustrating the
wage indexes shown in Table 7, the SNF wage index is based on a blend
of 60 percent of an average hourly wage including the GME costs, and 40
percent of an average hourly wage excluding these costs.
Table 7 shows a side by side comparison of the wage index. Column A
shows the Metropolitan Statistical Area (MSA); Column B shows the wage
index, utilizing data derived from SNFs with cost reporting periods
ending during FY 1998; Column C shows the wage index developed using
SNF data from cost reporting periods ending during FY 1999; and Column
D shows the wage index from the FY 2001 final rule, as revised by the
correction notice published on January 16, 2001 (66 FR 3497).
Table 7.--Wage Index For Urban Areas
------------------------------------------------------------------------
Urban Area (Constituent Wage Index
Counties or County -----------------------------------------
Equivalents) SNF98 SNF99 HOSP
------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
------------------------------------------------------------------------
0040 Abilene, TX............. 0.7354 0.8162 0.8240
Taylor, TX
0060 Aguadilla, PR........... 0.0000 0.0000 0.4391
Aguada, PR
[[Page 23994]]
Aguadilla, PR
Moca, PR
0080 Akron, OH............... 0.9636 1.0553 0.9736
Portage, OH
Summit, OH
0120 Albany, GA.............. 0.6203 0.7460 0.9933
Dougherty, GA
Lee, GA
0160 Albany-Schenectady-Troy, 1.0860 1.0809 0.8549
NY...........................
Albany, NY
Montgomery, NY
Rensselaer, NY
Saratoga, NY
Schenectady, NY
Schoharie, NY
0200 Albuquerque, NM......... 0.7892 0.7980 0.9136
Bernalillo, NM
Sandoval, NM
Valencia, NM
0220 Alexandria, LA.......... 0.7849 0.6318 0.8123
Rapides, LA
0240 Allentown-Bethlehem- 1.1553 1.0749 0.9925
Easton, PA...................
Carbon, PA
Lehigh, PA
Northampton, PA
0280 Altoona, PA............. 0.9559 0.9712 0.9346
Blair, PA
0320 Amarillo, TX............ 0.8377 0.8338 0.8715
Potter, TX
Randall, TX
0380 Anchorage, AK........... 1.5003 1.4716 1.2793
Anchorage, AK
0440 Ann Arbor, MI........... 1.0845 1.1059 1.1254
Lenawee, MI
Livingston, MI
Washtenaw, MI
0450 Anniston, AL............ 0.7619 0.9226 0.8284
Calhoun, AL
0460 Appleton-Oshkosh-Neenah, 1.0962 1.0662 0.9052
WI...........................
Calumet, WI
Outagamie, WI
Winnebago, WI
0470 Arecibo, PR............. 0.0000 0.0000 0.4525
Arecibo, PR
Camuy, PR
Hatillo, PR
0480 Asheville, NC........... 0.9090 0.9482 0.9516
Buncombe, NC
Madison, NC
0500 Athens, GA.............. 0.9653 0.9264 0.9739
Clarke, GA
Madison, GA
Oconee, GA
0520 Atlanta, GA............. 0.9733 0.9474 1.0096
Barrow, GA
Bartow, GA
Carroll, GA
Cherokee, GA
Clayton, GA
Cobb, GA
Coweta, GA
De Kalb, GA
Douglas, GA
Fayette, GA
Forsyth, GA
Fulton, GA
Gwinnett, GA
Henry, GA
Newton, GA
Paulding, GA
Pickens, GA
Rockdale, GA
Spalding, GA
Walton, GA
0560 Atlantic City-Cape May, 1.1443 1.1406 1.1182
NJ...........................
Atlantic City, NJ
Cape May, NJ
[[Page 23995]]
0580 Auburn-Opelika, AL...... 0.9892 0.8857 0.8106
Lee, AL
0600 Augusta-Aiken, GA-SC.... 0.7831 0.7898 0.9160
Columbia, GA
McDuffie, GA
Richmond, GA
Aiken, SC
Edgefield, SC
0640 Austin-San Marcos, TX... 0.8694 0.8826 0.9577
Bastrop, TX
Caldwell, TX
Hays, TX
Travis, TX
Williamson, TX
0680 Bakersfield, CA......... 1.0005 1.0059 0.9678
Kern, CA
0720 Baltimore, MD........... 1.0144 0.9797 0.9365
Anne Arundel, MD
Baltimore, MD
Baltimore City, MD
Carroll, MD
Harford, MD
Howard, MD
Queen Annes, MD
0733 Bangor, ME.............. 1.0358 0.8851 0.9561
Penobscot, ME
0743 Barnstable-Yarmouth, MA. 1.2663 1.2722 1.3839
Barnstable, MA
0760 Baton Rouge, LA......... 0.7459 0.7803 0.8842
Ascension, LA
East Baton Rouge, LA
Livingston, LA
West Baton Rouge, LA
0840 Beaumont-Port Arthur, TX 0.8049 0.7895 0.8744
Hardin, TX
Jefferson, TX
Orange, TX
0860 Bellingham, WA.......... 0.9121 0.8984 1.1439
Whatcom, WA
0870 Benton Harbor, MI....... 0.8766 0.9098 0.8671
Berrien, MI
0875 Bergen-Passaic, NJ...... 1.3811 1.2739 1.1848
Bergen, NJ
Passaic, NJ
0880 Billings, MT............ 0.9429 0.9017 0.9585
Yellowstone, MT
0920 Biloxi-Gulfport- 0.8023 0.9676 0.8236
Pascagoula, MS...............
Hancock, MS
Harrison, MS
Jackson, MS
0960 Binghamton, NY.......... 0.9400 0.9231 0.8690
Broome, NY
Tioga, NY
1000 Birmingham, AL.......... 0.8846 0.9155 0.8452
Blount, AL
Jefferson, AL
St. Clair, AL
Shelby, AL
1010 Bismarck, ND............ 0.8939 0.8745 0.7705
Burleigh, ND
Morton, ND
1020 Bloomington, IN......... 0.8272 0.9108 0.8733
Monroe, IN
1040 Bloomington-Normal, IL.. 0.8547 0.9268 0.9095
McLean, IL
1080 Boise City, ID.......... 1.0779 0.9592 0.9006
Ada, ID
Canyon, ID
1123 Boston-Worcester- 1.2273 1.1947 1.1160
Lawrence-Lowell-Brockton, MA-
NH...........................
Bristol, MA
Essex, MA
Middlesex, MA
Norfolk, MA
Plymouth, MA
Suffolk, MA
Worcester, MA
Hillsborough, NH
[[Page 23996]]
Merrimack, NH
Rockingham, NH
Strafford, NH
1125 Boulder-Longmont, CO.... 1.1414 0.9062 0.9731
Boulder, CO
1145 Brazoria, TX............ 0.7869 0.7187 0.8658
Brazoria, TX
1150 Bremerton, WA........... 0.9945 0.9732 1.0975
Kitsap, WA
1240 Brownsville-Harlingen- 0.8226 0.7991 0.8722
San Benito, TX...............
Cameron, TX
1260 Bryan-College Station, 0.8326 0.6742 0.8237
TX...........................
Brazos, TX
1280 Buffalo-Niagara Falls, 1.0114 0.9494 0.9580
NY...........................
Erie, NY
Niagara, NY
1303 Burlington, VT.......... 1.0690 1.0145 1.0735
Chittenden, VT
Franklin, VT
Grand Isle, VT
1310 Caguas, PR.............. 0.0000 0.0000 0.4562
Caguas, PR
Cayey, PR
Cidra, PR
Gurabo, PR
San Lorenzo, PR
1320 Canton-Massillon, OH.... 0.9343 0.8839 0.8584
Carroll, OH
Stark, OH
1350 Casper, WY.............. 0.7798 0.8405 0.8724
Natrona, WY
1360 Cedar Rapids, IA........ 0.8652 0.9390 0.8736
Linn, IA
1400 Champaign-Urbana, IL.... 0.9478 1.0588 0.9198
Champaign, IL
1440 Charleston-North 0.7764 0.7695 0.9038
Charleston, SC...............
Berkeley, SC
Charleston, SC
Dorchester, SC
1480 Charleston, WV.......... 0.9525 0.9975 0.9240
Kanawha, WV
Putnam, WV
1520 Charlotte-Gastonia-Rock 1.0230 0.9661 0.9407
Hill, NC-SC..................
Cabarrus, NC
Gaston, NC
Lincoln, NC
Mecklenburg, NC
Rowan, NC
Stanly, NC
Union, NC
York, SC
1540 Charlottesville, VA..... 0.9619 0.9943 1.0789
Albemarle, VA
Charlottesville City, VA
Fluvanna, VA
Greene, VA
1560 Chattanooga, TN-GA...... 0.9186 0.8876 0.9833
Catoosa, GA
Dade, GA
Walker, GA
Hamilton, TN
Marion, TN
1580 Cheyenne, WY............ 1.0743 0.9800 0.8308
Laramie, WY
1600 Chicago, IL............. 0.9358 0.9860 1.1146
Cook, IL
De Kalb, IL
Du Page, IL
Grundy, IL
Kane, IL
Kendall, IL
Lake, IL
McHenry, IL
Will, IL
1620 Chico-Paradise, CA...... 0.9238 0.9565 0.9918
Butte, CA
[[Page 23997]]
1640 Cincinnati, OH-KY-IN... 0.9579 0.9615 0.9415
Dearborn, IN
Ohio, IN
Boone, KY
Campbell, KY
Gallatin, KY
Grant, KY
Kenton, KY
Pendleton, KY
Brown, OH
Clermont, OH
Hamilton, OH
Warren, OH
1660 Clarksville- 0.7928 0.7668 0.8204
Hopkinsville, TN-KY..........
Christian, KY
Montgomery, TN
1680 Cleveland-Lorain-Elyria, 1.0330 1.0271 0.9597
OH...........................
Ashtabula, OH
Geauga, OH
Cuyahoga, OH
Lake, OH
Lorain, OH
Medina, OH
1720 Colorado Springs, CO.... 0.8972 0.9387 0.9697
El Paso, CO
1740 Columbia, MO............ 0.9174 0.8050 0.8961
Boone, MO
1760 Columbia, SC............ 0.9423 0.9195 0.9554
Lexington, SC
Richland, SC
1800 Columbus, GA-AL......... 0.7897 0.8062 0.8568
Russell, AL
Chattanoochee, GA
Harris, GA
Muscogee, GA
1840 Columbus, OH............ 1.0294 1.0288 0.9619
Delaware, OH
Fairfield, OH
Franklin, OH
Licking, OH
Madison, OH
Pickaway, OH
1880 Corpus Christi, TX...... 0.8333 0.8573 0.8726
Nueces, TX
San Patricio, TX
1890 Corvallis, OR........... 0.7759 0.8492 1.1326
Benton, OR
1900 Cumberland, MD-WV....... 0.8879 0.9957 0.8369
Allegany, MD
Mineral, WV
1920 Dallas, TX.............. 0.8943 0.9558 0.9913
Collin, TX
Dallas, TX
Denton, TX
Ellis, TX
Henderson, TX
Hunt, TX
Kaufman, TX
Rockwall, TX
1950 Danville, VA............ 0.7390 0.7589 0.8589
Danville City, VA
Pittsylvania, VA
1960 Davenport-Moline-Rock 0.8633 0.8694 0.8898
Island, IA-IL................
Scott, IA
Henry, IL
Rock Island, IL
2000 Dayton-Springfield, OH.. 0.9102 0.9455 0.9442
Clark, OH
Greene, OH
Miami, OH
Montgomery, OH
2020 Daytona Beach, FL....... 0.8922 0.9231 0.9200
Flagler, FL
Volusia, FL
2030 Decatur, AL............. 0.9186 0.8669 0.8534
Lawrence, AL
Morgan, AL
[[Page 23998]]
2040 Decatur, IL............. 0.8804 0.8322 0.8125
Macon, IL
2080 Denver, CO.............. 1.0833 1.0643 1.0181
Adams, CO
Arapahoe, CO
Denver, CO
Douglas, CO
Jefferson, CO
2120 Des Moines, IA.......... 0.9003 0.9712 0.9118
Dallas, IA
Polk, IA
Warren, IA
2160 Detroit, MI............. 0.9798 0.9957 1.0510
Lapeer, MI
Macomb, MI
Monroe, MI
Oakland, MI
St. Clair, MI
Wayne, MI
2180 Dothan, AL.............. 0.7485 0.8621 0.7943
Dale, AL
Houston, AL
2190 Dover, DE............... 1.1346 1.0334 1.0078
Kent, DE
2200 Dubuque, IA............. 0.9533 1.0244 0.8746
Dubuque, IA
2240 Duluth-Superior, MN-WI.. 0.9492 1.0842 1.0032
St. Louis, MN
Douglas, WI
2281 Dutchess County, NY..... 1.0745 1.1267 1.0249
Dutchess, NY
2290 Eau Claire, WI.......... 0.9402 0.9868 0.8790
Chippewa, WI
Eau Claire, WI
2320 El Paso, TX............. 0.7912 0.8687 0.9346
El Paso, TX
2330 Elkhart-Goshen, IN 1.0718 0.9752 0.9145
Elkhart, IN
2335 Elmira, NY.............. 1.0063 1.0535 0.8546
Chemung, NY
2340 Enid, OK................ 0.7874 0.7879 0.8610
Garfield, OK
2360 Erie, PA................ 1.0605 1.0583 0.8985
Erie, PA
2400 Eugene-Springfield, OR.. 0.8713 0.8417 1.0965
Lane, OR
2440 Evansville-Henderson, IN- 0.9297 0.9342 0.8173
KY...........................
Posey, IN
Vanderburgh, IN
Warrick, IN
Henderson, KY
2520 Fargo-Moorhead, ND-MN... 0.9621 1.0643 0.8749
Clay, MN
Cass, ND
2560 Fayetteville, NC........ 0.8495 0.8584 0.8655
Cumberland, NC
2580 Fayetteville-Springdale- 0.8193 0.8512 0.7910
Rogers, AR...................
Benton, AR
Washington, AR
2620 Flagstaff, AZ-UT........ 1.2591 1.0997 1.0686
Coconino, AZ
Kane, UT
2640 Flint, MI............... 0.9788 0.9726 1.1205
Genesee, MI
2650 Florence, AL............ 0.9251 0.9031 0.7616
Colbert, AL
Lauderdale, AL
2655 Florence, SC............ 0.7684 0.7799 0.8777
Florence, SC
2670 Fort Collins-Loveland, 0.9010 0.9680 1.0647
CO...........................
Larimer, CO
2680 Ft. Lauderdale, FL....... 0.9681 0.9625 1.0121
Broward, FL
2700 Fort Myers-Cape Coral, 0.9444 0.8951 0.9247
FL...........................
Lee, FL
2710 Fort Pierce-Port St. 1.0172 0.9880 0.9538
Lucie, FL....................
Martin, FL
[[Page 23999]]
St. Lucie, FL
2720 Fort Smith, AR-OK....... 0.7268 0.7499 0.8052
Crawford, AR
Sebastian, AR
Sequoyah, OK
2750 Fort Walton Beach, FL... 0.9440 0.9582 0.9607
Okaloosa, FL
2760 Fort Wayne, IN ......... 0.9082 0.9763 0.8665
Adams, IN
Allen, IN
De Kalb, IN
Huntington, IN
Wells, IN
Whitley, IN
2800 Forth Worth-Arlington, 0.8821 0.9047 0.9527
TX...........................
Hood, TX
Johnson, TX
Parker, TX
Tarrant, TX
2840 Fresno, CA.............. 0.8738 0.9823 1.0104
Fresno, CA
Madera, CA
2880 Gadsden, AL............. 0.9108 0.6287 0.8423
Etowah, AL
2900 Gainesville, FL......... 0.9325 1.0300 1.0074
Alachua, FL
2920 Galveston-Texas City, TX 0.7678 0.6821 0.9918
Galveston, TX
2960 Gary, IN................ 0.9827 0.9807 0.9454
Lake, IN
Porter, IN
2975 Glens Falls, NY......... 0.9560 0.9772 0.8361
Warren, NY
Washington, NY
2980 Goldsboro, NC........... 0.9370 0.8740 0.8423
Wayne, NC
2985 Grand Forks, ND-MN...... 0.8816 0.9022 0.8816
Polk, MN
Grand Forks, ND
2995 Grand Junction, CO...... 0.9539 0.9156 0.9109
Mesa, CO.
3000 Grand Rapids-Muskegon- 0.9715 0.9978 1.0248
Holland, MI..................
Allegan, MI
Kent, MI
Muskegon, MI
Ottawa, MI
3040 Great Falls, MT......... 0.9712 1.0019 0.9065
Cascade, MT
3060 Greeley, CO............. 0.9253 0.8880 0.9814
Weld, CO
3080 Green Bay, WI........... 0.9441 1.0262 0.9225
Brown, WI
3120 Greensboro-Winston-Salem- 1.0166 0.9782 0.9131
High Point, NC...............
Alamance, NC
Davidson, NC
Davie, NC
Forsyth, NC
Guilford, NC
Randolph, NC
Stokes, NC
Yadkin, NC
3150 Greenville, NC.......... 0.8844 0.9400 0.9384
Pitt, NC
3160 Greenville-Spartanburg- 0.8362 0.9622 0.9003
Anderson, SC.................
Anderson, SC
Cherokee, SC
Greenville, SC
Pickens, SC
Spartanburg, SC
3180 Hagerstown, MD.......... 0.9318 0.9153 0.9409
Washington, MD
3200 Hamilton-Middletown, OH. 0.9739 0.9532 0.9061
Butler, OH
3240 Harrisburg-Lebanon- 1.1052 1.0753 0.9386
Carlisle, PA.................
Cumberland, PA
Dauphin, PA
Lebanon, PA
[[Page 24000]]
Perry, PA
3283 Hartford, CT............ 1.2733 1.1675 1.1373
Hartford, CT
Litchfield, CT
Middlesex, CT
Tolland, CT
3285 Hattiesburg, MS......... 0.8421 0.7540 0.7490
Forrest, MS
Lamar, MS
3290 Hickory-Morganton- 0.9086 0.9027 0.9008
Lenoir, NC...................
Alexander, NC
Burke, NC
Caldwell, NC
Catawba, NC
3320 Honolulu, HI............ 1.2242 1.2838 1.1863
Honolulu, HI
3350 Houma, LA............... 0.6694 0..6749 0.8086
Lafourche, LA
Terrebonne, LA
3360 Houston, TX............. 0.8506 0.8634 0.9732
Chambers, TX
Fort Bend, TX
Harris, TX
Liberty, TX
Montgomery, TX
Waller, TX
3400 Huntington-Ashland, WV- 0.7948 0.8957 0.9876
KY-OH........................
Boyd, KY
Carter, KY
Greenup, KY
Lawrence, OH
Cabell, WV
Wayne, WV
3440 Huntsville, AL.......... 0.9774 0.7569 0.8932
Limestone, AL
Madison, AL
3480 Indianapolis, IN........ 0.9932 1.0128 0.9787
Boone, IN
Hamilton, IN
Hancock, IN
Hendricks, IN
Johnson, IN
Madison, IN
Marion, IN
Morgan, IN
Shelby, IN
3500 Iowa City, IA........... 0.9092 0.8611 0.9657
Johnson, IA
3520 Jackson, MI............. 0.9393 1.0367 0.9134
Jackson, MI
3560 Jackson, MS............. 0.8731 0.9642 0.8812
Hinds, MS
Madison, MS
Rankin, MS
3580 Jackson, TN............. 0.9437 0.8032 0.8796
Chester, TN
Madison, TN
3600 Jacksonville, FL........ 0.9566 0.9309 0.9208
Clay, FL
Duval, FL
Nassau, FL
St. Johns, FL
3605 Jacksonville, NC........ 0.6554 0.8257 0.7777
Onslow, NC
3610 Jamestown, NY........... 0.9276 0.8990 0.7818
Chautaqua, NY
3620 Janesville-Beloit, WI... 0.8899 0.9652 0.9585
Rock, WI
3640 Jersey City, NJ......... 1.2879 0.8535 1.1502
Hudson, NJ
3660 Johnson City-Kingsport- 0.8853 0.8303 0.8272
Bristol, TN-VA...............
Carter, TN
Hawkins, TN
Sullivan, TN
Unicoi, TN
Washington, TN
Bristol City, VA
[[Page 24001]]
Scott, VA
Washington, VA
3680 Johnstown, PA........... 0.9877 0.9914 0.8846
Cambria, PA
Somerset, PA
3700 Jonesboro, AR........... 0.6568 0.8322 0.7832
Craighead, AR
3710 Joplin, MO............. 0.8112 0.8128 0.8148
Jasper, MO
Newton, MO
3720 Kalamazoo-Battle Creek, 0.9773 0.9982 1.0453
MI...........................
Calhoun, MI
Kalamazoo, MI
Van Buren, MI
3740 Kankakee, IL............ 0.8635 0.8886 0.9902
Kankakee, IL
3760 Kansas City, KS-MO...... 0.9439 0.9726 0.9527
Johnson, KS
Leavenworth, KS
Miami, KS
Wyandotte, KS
Cass, MO
Clay, MO
Clinton, MO
Jackson, MO
Lafayette, MO
Platte, MO
Ray, MO
3800 Kenosha, WI............. 1.1006 1.0354 0.9611
Kenosha, WI
3810 Killeen-Temple, TX...... 0.7996 0.8280 1.0119
Bell, TX
Coryell, TX
3840 Knoxville, TN........... 0.9046 0.8712 0.8340
Anderson, TN
Blount, TN
Knox, TN
Loudon, TN
Sevier, TN
Union, TN
3850 Kokomo, IN.............. 1.0415 0.8785 0.9518
Howard, IN
Tipton, IN
3870 La Crosse, WI-MN........ 0.9343 0.9838 0.9211
Houston, MN
La Crosse, WI
3880 Lafayette, LA........... 0.7373 0.7000 0.8490
Acadia, LA
Lafayette, LA
St. Landry, LA
St. Martin, LA
3920 Lafayette, IN........... 1.0308 0.9298 0.8834
Clinton, IN
Tippecanoe, IN
3960 Lake Charles, LA........ 0.7437 0.7102 0.7399
Calcasieu, LA
3980 Lakeland-Winter Haven, 1.0545 1.0235 0.9239
FL...........................
Polk, FL
4000 Lancaster, PA........... 1.0528 1.0114 0.9259
Lancaster, PA
4040 Lansing-East Lansing, MI 0.9933 1.0271 0.9934
Clinton, MI
Eaton, MI
Ingham, MI
4080 Laredo, TX.............. 0.7832 0.8348 0.8168
Webb, TX
4100 Las Cruces, NM.......... 0.6816 0.7263 0.8658
Dona Ana, NM
4120 Las Vegas, NV-AZ........ 1.0189 1.0278 1.0796
Mohave, AZ
Clark, NV
Nye, NV
4150 Lawrence, KS............ 0.9625 0.9352 0.8190
Douglas, KS
4200 Lawton, OK.............. 0.6546 0.7951 0.8996
Comanche, OK
4243 Lewiston-Auburn, ME..... 0.8717 0.9202 0.9036
[[Page 24002]]
Androscoggin, ME
4280 Lexington, KY........... 0.9208 0.7549 0.8866
Bourbon, KY
Clark, KY
Fayette, KY
Jessamine, KY
Madison, KY
Scott, KY
Woodford, KY
4320 Lima, OH................ 0.8609 0.9397 0.9320
Allen, OH
Auglaize, OH
4360 Lincoln, NE............. 1.0497 1.0192 0.9626
Lancaster, NE
4400 Little Rock-North Little 0.9213 0.9210 0.8906
Rock, AR.....................
Faulkner, AR
Lonoke, AR
Pulaski, AR
Saline, AR
4420 Longview-Marshall, TX... 0.7978 0.9291 0.8922
Gregg, TX
Harrison, TX
Upshur, TX
4480 Los Angeles-Long Beach, 1.0083 1.0129 1.1996
CA...........................
Los Angeles, CA
4520 Louisville, KY-IN....... 0.9433 0.9206 0.9350
Clark, IN
Floyd, IN
Harrison, IN
Scott, IN
Bullitt, KY
Jefferson, KY
Oldham, KY
4600 Lubbock, TX............. 0.7676 0.7802 0.8838
Lubbock, TX
4640 Lynchburg, VA........... 0.8673 0.8209 0.8867
Amherst, VA
Bedford City, VA
Bedford, VA
Campbell, VA
Lynchburg City, VA
4680 Macon, GA............... 0.8420 0.7877 0.8974
Bibb, GA
Houston, GA
Jones, GA
Peach, GA
Twiggs, GA
4720 Madison, WI............. 0.9982 1.0705 1.0271
Dane, WI
4800 Mansfield, OH........... 0.8294 0.9051 0.8690
Crawford, OH
Richland, OH
4840 Mayaguez, PR............ 0.0000 0.0000 0.4589
Anasco, PR
Cabo Rojo, PR
Hormigueros, PR
Mayaguez, PR
Sabana Grande, PR
San German, PR
4880 McAllen-Edinburg- 0.8136 0.7935 0.8566
Mission, TX..................
Hidalgo, TX
4890 Medford-Ashland, OR..... 0.9732 0.9528 1.0344
Jackson, OR
4900 Melbourne-Titusville- 1.0452 1.0178 0.9688
Palm Bay, FL.................
Brevard, Fl
4920 Memphis, TN-AR-MS....... 0.9554 0.9919 0.8723
Crittenden, AR
De Soto, MS
Fayette, TN
Shelby, TN
Tipton, TN
4940 Merced, CA.............. 0.7959 0.9022 0.9646
Merced, CA
5000 Miami, FL............... 0.9359 0.9577 1.0059
Dade, FL
5015 Middlesex-Somerset- 1.1283 1.2052 1.1075
Hunterdon, NJ................
Hunterdon, NJ
[[Page 24003]]
Middlesex, NJ
Somerset, NJ
5080 Milwaukee-Waukesha, WI.. 1.0373 1.0397 0.9767
Milwaukee, WI
Ozaukee, WI
Washington, WI
Waukesha, WI
5120 Minneapolis-St Paul, MN- 1.2186 1.2375 1.1017
WI...........................
Anoka, MN
Carver, MN
Chisago, MN
Dakota, MN
Hennepin, MN
Isanti, MN
Ramsey, MN
Scott, MN
Sherburne, MN
Washington, MN
Wright, MN
Pierce, WI
St. Croix, WI
5140 Missoula, MT........... 0.9197 0.8724 0.9274
Missoula, MT
5160 Mobile, AL.............. 0.8273 0.9284 0.8163
Baldwin, AL
Mobile, AL
5170 Modesto, CA............. 0.8732 0.9675 1.0396
Stanislaus, CA
5190 Monmouth-Ocean, NJ...... 1.1251 1.0979 1.1278
Monmouth, NJ
Ocean, NJ
5200 Monroe, LA.............. 0.7793 0.8161 0.8396
Ouachita, LA
5240 Montgomery, AL.......... 0.7738 0.8229 0.7653
Autauga, AL
Elmore, AL
Montgomery, AL
5280 Muncie, IN.............. 0.9597 0.9550 1.0969
Delaware, IN
5330 Myrtle Beach, SC........ 0.9077 0.7922 0.8440
Horry, SC
5345 Naples, FL.............. 0.9628 1.0437 0.9661
Collier, FL
5360 Nashville, TN........... 0.9408 0.9345 0.9490
Cheatham, TN
Davidson, TN
Dickson, TN
Robertson, TN
Rutherford, TN
Sumner, TN
Williamson, TN
Wilson, TN
5380 Nassau-Suffolk, NY...... 1.5592 1.5034 1.3932
Nassau, NY
Suffolk, NY
5483 New Haven-Bridgeport- 1.2799 1.3446 1.2297
Stamford-Waterbury-Danbury,
CT...........................
Fairfield, CT
New Haven, CT
5523 New London-Norwich, CT.. 1.2035 1.2438 1.2063
New London, CT
5560 New Orleans, LA......... 0.8077 0.8436 0.9295
Jefferson, LA
Orleans, LA
Plaquemines, LA
St. Bernard, LA
St. Charles, LA
St. James, LA
St. John The Baptist, LA
St. Tammany, LA
5600 New York, NY............ 1.5638 1.4983 1.4651
Bronx, NY
Kings, NY
New York, NY
Putnam, NY
Queens, NY
Richmond, NY
Rockland, NY
[[Page 24004]]
Westchester, NY
5640 Newark, NJ.............. 1.2344 1.1704 1.1837
Essex, NJ
Morris, NJ
Sussex, NJ
Union, NJ
Warren, NJ
5660 Newburgh, NY-PA......... 1.2791 1.2347 1.0847
Orange, NY
Pike, PA
5720 Norfolk-Virginia Beach- 0.8084 0.7828 0.8412
Newport News, VA-NC..........
Currituck, NC
Chesapeake City, VA
Gloucester, VA
Hampton City, VA
Isle of Wight, VA
James City, VA
Mathews, VA
Newport News City, VA
Norfolk City, VA
Poquoson City, VA
Portsmouth City, VA
Suffolk City, VA
Virginia Beach City, VA
Williamsburg City, VA
York, VA
5775 Oakland, CA............. 1.0815 1.0616 1.4983
Alameda, CA
Contra Costa, CA
5790 Ocala, FL............... 0.9967 0.7345 0.9243
Marion, FL
5800 Odessa-Midland, TX...... 0.7857 0.8858 0.9205
Ector, TX
Midland, TX
5880 Oklahoma City, OK....... 0.7911 0.7955 0.8822
Canadian, OK
Cleveland, OK
Logan, OK
McClain, OK
Oklahoma, OK
Pottawatomie, OK
5910 Olympia, WA............. 0.9888 0.9548 1.0677
Thurston, WA
5920 Omaha, NE-IA............ 1.0212 1.0731 0.9572
Pottawattamie, IA
Cass, NE
Douglas, NE
Sarpy, NE
Washington, NE
5945 Orange County, CA....... 1.0747 1.0649 1.1467
Orange, CA
5960 Orlando, FL............. 0.9445 0.9566 0.9610
Lake, FL
Orange, FL
Osceola, FL
Seminole, FL
5990 Owensboro, KY........... 1.0374 0.8987 0.8159
Daviess, KY
6015 Panama City, FL......... 0.9224 0.9344 0.9010
Bay, FL
6020 Parkersburg-Marietta, WV- 0.9779 0.9064 0.8274
OH...........................
Washington, OH
Wood, WV
6080 Pensacola, FL........... 0.7929 0.8519 0.8176
Escambia, FL
Santa Rosa, FL
6120 Peoria-Pekin, IL........ 0.8375 0.9017 0.8645
Peoria, IL
Tazewell, IL
Woodford, IL
6160 Philadelphia, PA-NJ..... 1.1553 1.1460 1.0937
Burlington, NJ
Camden, NJ
Gloucester, NJ
Salem, NJ
Bucks, PA
Chester, PA
[[Page 24005]]
Delaware, PA
Montgomery, PA
Philadelphia, PA
6200 Phoenix-Mesa, AZ........ 1.0176 1.0219 0.9669
Maricopa, AZ
Pinal, AZ
6240 Pine Bluff, AR.......... 0.6727 0.7983 0.7791
Jefferson, AR
6280 Pittsburgh, PA.......... 1.0937 1.0574 0.9741
Allegheny, PA
Beaver, PA
Butler, PA
Fayette, PA
Washington, PA
Westmoreland, PA
6323 Pittsfield, MA.......... 1.1357 1.0739 1.0288
Berkshire, MA
6340 Pocatello, ID........... 0.7864 0.7717 0.9076
Bannock, ID
6360 Ponce, PR............... 0.7238 0.6854 0.5006
Guayanilla, PR
Juana Diaz, PR
Penuelas, PR
Ponce, PR
Villalba, PR
Yauco, PR
6403 Portland, ME............ 1.0594 1.0378 0.9748
Cumberland, ME
Sagadahoc, ME
York, ME
6440 Portland-Vancouver, OR- 1.0495 1.0048 1.0910
WA...........................
Clackamas, OR
Columbia, OR
Multnomah, OR
Washington, OR
Yamhill, OR
Clark, WA
6483 Providence-Warwick- 1.0486 1.0120 1.0864
Pawtucket, RI................
Bristol, RI
Kent, RI
Newport, RI
Providence, RI
Washington, RI
6520 Provo-Orem, UT.......... 0.7640 0.9453 1.0029
Utah, UT
6560 Pueblo, CO.............. 0.8689 0.9305 0.8815
Pueblo, CO
6580 Punta Gorda, FL......... 0.9549 0.9761 0.9613
Charlotte, FL
6600 Racine, WI.............. 1.1701 1.1432 0.9246
Racine, WI
6640 Raleigh-Durham-Chapel 1.0767 1.0122 0.9646
Hill, NC.....................
Chatham, NC
Durham, NC
Franklin, NC
Johnston, NC
Orange, NC
Wake, NC
6660 Rapid City, SD.......... 0.7728 0.9584 0.8865
Pennington, SD
6680 Reading, PA............. 1.0531 1.1283 0.9152
Berks, PA
6690 Redding, CA............. 1.1269 1.0330 1.1664
Shasta, CA
6720 Reno, NV................ 1.0926 1.2112 1.0550
Washoe, NV
6740 Richland-Kennewick- 1.0241 1.0334 1.1460
Pasco, WA....................
Benton, WA
Franklin, WA
6760 Richmond-Petersburg, VA. 0.7927 0.8517 0.9617
Charles City County, VA
Chesterfield, VA
Colonial Heights City, VA
Dinwiddie, VA
Goochland, VA
Hanover, VA
Henrico, VA
[[Page 24006]]
Hopewell City, VA
New Kent, VA
Petersburg City, VA
Powhatan, VA
Prince George, VA
Richmond City, VA
6780 Riverside-San 1.0127 1.0086 1.1239
Bernardino, CA...............
Riverside, CA
San Bernardino, CA
6800 Roanoke, VA............. 0.7443 0.8052 0.8750
Botetourt, VA
Roanoke, VA
Roanoke City, VA
Salem City, VA
6820 Rochester, MN........... 1.1764 1.1235 1.1315
Olmsted, MN
6840 Rochester, NY........... 1.0708 1.0488 0.9182
Genesee, NY
Livingston, NY
Monroe, NY
Ontario, NY
Orleans, NY
Wayne, NY
6880 Rockford, IL............ 0.8844 0.9617 0.8819
Boone, IL
Ogle, IL
Winnebago, IL
6895 Rocky Mount, NC......... 0.9221 0.8247 0.8849
Edgecombe, NC
Nash, NC
6920 Sacramento, CA.......... 1.0230 1.0580 1.1950
El Dorado, CA
Placer, CA
Sacramento, CA
A6960 Saginaw-Bay City- 0.8510 0.9002 0.9575
Midland, MI..................
Bay, MI
Midland, MI
Saginaw, MI
6980 St. Cloud, MN........... 0.8480 0.9556 1.0016
Benton, MN
Stearns, MN
7000 St. Joseph, MO.......... 1.1074 1.0774 0.9071
Andrews, MO
Buchanan, MO
7040 St. Louis, MO-IL........ 0.8900 0.9056 0.9049
Clinton, IL
Jersey, IL
Madison, IL
Monroe, IL
St. Clair, IL
Franklin, MO
Jefferson, MO
Lincoln, MO
St. Charles, MO
St. Louis, MO
St. Louis City, MO
Warren, MO
Sullivan City, MO
7080 Salem, OR............... 0.9308 0.8379 1.0189
Marion, OR
Polk, OR
7120 Salinas, CA............. 1.0856 1.1224 1.4502
Monterey, CA
7160 Salt Lake City-Ogden, UT 0.9984 0.9405 0.9807
Davis, UT
Salt Lake, UT
Weber, UT
7200 San Angelo, TX.......... 0.8222 0.7841 0.8083
Tom Green, TX
7240 San Antonio, TX......... 0.8252 0.8159 0.8580
Bexar, TX
Comal, TX
Guadalupe, TX
Wilson, TX
7320 San Diego, CA........... 1.0177 1.0038 1.1784
San Diego, CA
7360 San Francisco, CA....... 1.1958 1.1930 1.4156
[[Page 24007]]
Marin, CA
San Francisco, CA
San Mateo, CA
7400 San Jose, CA............ 1.0787 1.1736 1.3652
Santa Clara, CA
7440 San Juan-Bayamon, PR... 0.5454 0.5070 0.4690
Aguas Buenas, PR
Barceloneta, PR
Bayamon, PR
Canovanas, PR
Carolina, PR
Catano, PR
Ceiba, PR
Comerio, PR
Corozal, PR
Dorado, PR
Fajardo, PR
Florida, PR
Guaynabo, PR
Humacao, PR
Juncos, PR
Los Piedras, PR
Loiza, PR
Luguillo, PR
Manati, PR
Morovis, PR
Naguabo, PR
Naranjito, PR
Rio Grande, PR
San Juan, PR
Toa Alta, PR
Toa Baja, PR
Trujillo Alto, PR
Vega Alta, PR
Vega Baja, PR
Yabucoa, PR
7460 San Luis Obispo- 1.0873 0.9472 1.0673
Atascadero-Paso Robles, CA...
San Luis Obispo, CA
7480 Santa Barbara-Santa 0.9547 1.0338 1.0597
Maria-Lompoc, CA.............
Santa Barbara, CA
7485 Santa Cruz-Watsonville, 1.1349 0.9398 1.4040
CA...........................
Santa Cruz, CA
7490 Santa Fe, NM............. 0.8636 1.3115 1.0537
Los Alamos, NM
Santa Fe, NM
7500 Santa Rosa, CA.......... 1.0368 1.1709 1.2646
Sonoma, CA
7510 Sarasota-Bradenton, FL.. 1.0006 1.0294 0.9809
Manatee, FL
Sarasota, FL
7520 Savannah, GA............ 0.8804 0.7861 0.9697
Bryan, GA
Chatham, GA
Effingham, GA
7560 Scranton-Wilkes-Barre- 1.0313 1.0346 0.8421
Hazleton, PA.................
Columbia, PA
Lackawanna, PA
Luzerne, PA
Wyoming, PA
7600 Seattle-Bellevue- 1.1078 1.0440 1.0996
Everett, WA..................
Island, WA
King, WA
Snohomish, WA
7610 Sharon, PA.............. 1.0333 0.9605 0.7928
Mercer, PA
7620 Sheboygan, WI........... 1.1775 1.2892 0.8379
Sheboygan, WI
7640 Sherman-Denison, TX..... 0.8663 0.8372 0.8694
Grayson, TX
7680 Shreveport-Bossier City, 0.7241 0.6735 0.8750
LA...........................
Bossier, LA
Caddo, LA
Webster, LA
7720 Sioux City, IA-NE...... 0.9021 0.9063 0.8473
Woodbury, IA
Dakota, NE
7760 Sioux Falls, SD......... 0.8511 0.9286 0.8790
[[Page 24008]]
Lincoln, SD
Minnehaha, SD
7800 South Bend, IN.......... 1.0075 1.0621 1.0000
St. Joseph, IN
7840 Spokane, WA............. 0.9486 0.9854 1.0513
Spokane, WA
7880 Springfield, IL......... 0.8276 0.9314 0.8685
Menard, IL
Sangamon, IL
7920 Springfield, MO......... 0.9289 0.9309 0.8488
Christian, MO
Greene, MO
Webster, MO
8003 Springfield, MA..... 1.2171 1.1537 1.0637
Hampden, MA
Hampshire, MA
8050 State College, PA....... 1.0164 0.9558 0.9038
Centre, PA
8080 Steubenville-Weirton, OH- 0.9182 0.9057 0.8548
WV...........................
Jefferson, OH
Brooke, WV
Hancock, WV
8120 Stockton-Lodi, CA....... 0.9860 1.0313 1.0629
San Joaquin, CA
8140 Sumter, SC.............. 0.7762 0.8687 0.8271
Sumter, SC
8160 Syracuse, NY............ 1.0121 1.0499 0.9549
Cayuga, NY
Madison, NY
Onondaga, NY
Oswego, NY
8200 Tacoma, WA.............. 0.9407 0.9441 1.1564
Pierce, WA
8240 Tallahassee, FL......... 0.9658 0.9761 0.8545
Gadsden, FL
Leon, FL
8280 Tampa-St. Petersburg- 1.0177 1.0025 0.8982
Clearwater, FL...............
Hernando, FL
Hillsborough, FL
Pasco, FL
Pinellas, FL
8320 Terre Haute, IN......... 0.8222 0.8286 0.8304
Clay, IN
Vermillion, IN
Vigo, IN
8360 Texarkana, AR-Texarkana, 0.8290 0.8049 0.8363
TX...........................
Miller, AR
Bowie, TX
8400 Toledo, OH.............. 0.9963 0.9904 0.9832
Fulton, OH
Lucas, OH
Wood, OH
8440 Topeka, KS.............. 0.7969 0.8241 0.9117
Shawnee, KS
8480 Trenton, NJ............. 1.1897 1.1835 1.0137
Mercer, NJ
8520 Tucson, AZ.............. 0.9488 0.9534 0.8794
Pima, AZ
8560 Tulsa, OK............... 0.8445 0.8104 0.8454
Creek, OK
Osage, OK
Rogers, OK
Tulsa, OK
Wagoner, OK
8600 Tuscaloosa, AL.......... 0.8490 0.8208 0.8064
Tuscaloosa, AL
8640 Tyler, TX............... 0.8607 0.8562 0.9404
Smith, TX
8680 Utica-Rome, NY.......... 0.9634 0.9279 0.8560
Herkimer, NY
Oneida, NY
8720 Vallejo-Fairfield-Napa, 1.1949 1.1287 1.2847
CA...........................
Napa, CA
Solano, CA
8735 Ventura, CA............. 1.0838 1.0338 1.1030
Ventura, CA
8750 Victoria, TX............ 0.7002 0.7270 0.8154
[[Page 24009]]
Victoria, TX
8760 Vineland-Millville- 1.1806 1.1019 1.0501
Bridgeton, NJ................
Cumberland, NJ
8780 Visalia-Tulare- 0.9010 0.9027 0.9551
Porterville, CA..............
Tulare, CA
8800 Waco, TX................ 0.8453 0.8291 0.8314
McLennan, TX
8840 Washington, DC-MD-VA-WV. 1.0430 1.0368 1.0755
District of Columbia, DC
Calvert, MD
Charles, MD
Frederick, MD
Montgomery, MD
Prince Georges, MD
Alexandria City, VA
Arlington, VA
Clarke, VA
Culpepper, VA
Fairfax, VA
Fairfax City, VA
Falls Church City, VA
Fauquier, VA
Fredericksburg City, VA
King George, VA
Loudoun, VA
Manassas City, VA
Manassas Park City, VA
Prince William, VA
Spotsylvania, VA
Stafford, VA
Warren, VA
Berkeley, WV
Jefferson, WV
8920 Waterloo-Cedar Falls, IA 0.8201 0.8820 0.8404
Black Hawk, IA
8940 Wausau, WI.............. 1.1470 1.2648 0.9418
Marathon, WI
8960 West Palm Beach-Boca 1.0131 0.9912 0.9682
Raton, FL....................
Palm Beach, FL
9000 Wheeling, OH-WV......... 0.9131 0.9078 0.7733
Belmont, OH
Marshall, WV
Ohio, WV
9040 Wichita, KS............. 0.9211 0.9050 0.9544
Butler, KS
Harvey, KS
Sedgwick, KS
9080 Wichita Falls, TX....... 0.7375 0.7385 0.7668
Archer, TX
Wichita, TX
9140 Williamsport, PA........ 0.9543 1.0264 0.8392
Lycoming, PA
9160 Wilmington-Newark, DE-MD 1.0931 1.0284 1.1191
New Castle, DE
Cecil, MD
9200 Wilmington, NC.......... 0.9507 0.8675 0.9402
New Hanover, NC
Brunswick, NC
9260 Yakima, WA.............. 0.9038 0.8770 0.9907
Yakima, WA
9270 Yolo, CA................ 1.0452 1.0260 1.0199
Yolo, CA
9280 York, PA................ 1.0718 1.0923 0.9264
York, PA
9320 Youngstown-Warren, OH... 0.8731 0.8594 0.9543
Columbiana, OH
Mahoning, OH
Trumbull, OH
9340 Yuba City, CA........... 1.0615 1.0246 1.0706
Sutter, CA
Yuba, CA
9360 Yuma, AZ................ 0.9209 0.9020 0.9529
Yuma, AZ
------------------------------------------------------------------------
[[Page 24010]]
Table 8.--Wage Index for Rural Areas
------------------------------------------------------------------------
Wage index
Rural area -----------------------------------------
SNF98 SNF99 HOSP
------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
------------------------------------------------------------------------
Alabama....................... 0.7724 0.8020 0.7489
Alaska........................ 1.4132 1.3582 1.2392
Arizona....................... 1.0111 0.9175 0.8317
Arkansas...................... 0.6972 0.7278 0.7445
California.................... 0.9685 0.9712 0.9861
Colorado...................... 0.8710 0.9147 0.8968
Connecticut................... 1.2870 1.0540 1.1715
Delaware...................... 1.0854 0.9338 0.9074
Florida....................... 0.8331 0.8921 0.8919
Georgia....................... 0.7850 0.7985 0.8329
Guam.......................... 0.0000 0.0000 0.9611
Hawaii........................ 1.1915 1.2995 1.1059
Idaho......................... 0.8892 0.8320 0.8678
Illinois...................... 0.8296 0.8274 0.8160
Indiana....................... 0.8875 0.9008 0.8602
Iowa.......................... 0.7706 0.7834 0.8030
Kansas........................ 0.7562 0.7941 0.7605
Kentucky...................... 0.8237 0.7905 0.7931
Louisiana..................... 0.6699 0.7014 0.7681
Maine......................... 0.8766 0.8908 0.8766
Maryland...................... 0.9015 0.8780 0.8651
Massachusetts................. 1.1740 1.2039 1.1204
Michigan...................... 0.9505 0.9655 0.8987
Minnesota..................... 1.1396 1.0221 0.8881
Mississippi................... 0.7412 0.7885 0.7491
Missouri...................... 0.7904 0.7898 0.7698
Montana....................... 0.8996 0.8606 0.8688
Nebraska...................... 0.7977 0.8182 0.8109
Nevada........................ 0.8621 0.9222 0.9232
New Hampshire................. 1.1065 1.1171 0.9845
New Jersey 1.................. ............ ............ ............
New Mexico.................... 0.6834 0.8052 0.8497
New York...................... 1.0081 0.9981 0.8499
North Carolina................ 0.9255 0.9028 0.8445
North Dakota.................. 0.7649 0.7779 0.7716
Ohio.......................... 0.8895 0.8948 0.8670
Oklahoma...................... 0.7481 0.7275 0.7491
Oregon........................ 0.8616 0.8455 1.0132
Pennsylvania.................. 0.9870 0.9443 0.8578
Puerto Rico................... 0.3897 0.3866 0.4264
Rhode Island 1................ ............ ............ ............
South Carolina................ 0.7941 0.8367 0.8370
South Dakota.................. 0.7946 0.8373 0.7570
Tennessee..................... 0.8656 0.8415 0.7838
Texas......................... 0.7512 0.7528 0.7502
Utah.......................... 0.9492 0.8196 0.9037
Vermont....................... 0.9914 1.0299 0.9274
Virginia...................... 0.8157 0.8601 0.8189
Virgin Islands................ 0.0000 0.0000 0.6306
Washington.................... 0.9539 0.9475 1.0434
West Virginia................. 0.8260 0.8668 0.8231
Wisconsin..................... 0.9516 0.9893 0.8880
Wyoming....................... 0.9081 0.8314 0.8817
------------------------------------------------------------------------
1 All counties within the State are classified urban.
We have drawn the following conclusions from these tables and our
analysis of the wage data:
A comparison of the wage index based on hospital data with one
based on SNF-specific wage data has created many significant variances,
not only between the SNF wage index and the hospital wage index, but
also between the two SNF wage indexes illustrated in Tables 7 and 8.
While we would expect some changes from year to year, and between a
wage index based on SNF data and one based on hospital data, we believe
that the large quantity of significant variations raises questions as
to the reliability of the SNF-specific wage data.
The following illustrates the impact of using the various wage
indexes contained in Tables 7 and 8:
When comparing the FY 1998 SNF-specific wage index to the
hospital wage index, we found the number of areas that:
Increased more than 20%--15 (the highest was 44.59%)
Increased between 10-20%--53
[[Page 24011]]
Increased between 5-10%--49
Increased between 0-5%--64
Decreased between 0-5%--69
Decreased between 5-10%--56
Decreased between 10-20%--51
Decreased greater than 20%--12 (the largest was 37.55%)
When comparing the FY 1999 SNF-specific wage index to the
hospital wage index, we found the number of areas that:
Increased more than 20%--12 (the largest was 53.86%)
Increased between 10-20%--47
Increased between 5-10%--67
Increased between 0-5%--70
Decreased between 0-5%--56
Decreased between 5-10%--60
Decreased between 10-20%--44
Decreased greater than 20%--13 (the largest was 33.06%)
When comparing the FY 1998 SNF-specific wage index to the
FY 1999 SNF-specific wage index, we found the number of areas that:
Increased more than 20%--9 (the largest was 51.86%)
Increased between 10-20%--25
Increased between 5-10%--52
Increased between 0-5%--102
Decreased between 0-5%--110
Decreased between 5-10%--44
Decreased between 10-20%--22
Decreased greater than 20%--5 (the largest was 33.73%)
The FY 1998 and FY 1999 SNF wage index had 6 areas with no values.
For FY 1998, from a total of 13,587 freestanding providers, we
eliminated 2,674 providers because they had a zero value for wages or
hours. For hospital-based SNFs, of the 2,185 providers, we eliminated
160 providers for the same reason. For FY 1999, of the 12,491
freestanding providers, we eliminated 2,461 providers because they had
a zero value for wages or hours. For hospital-based SNFs, of the 2,034
providers, we eliminated 132 providers for the same reason. In
addition, for FY 1998, we eliminated 231 providers that had average
hourly wages either below $5.00, or above the 99th percentile ($24.15).
For FY 1999, we eliminated 206 providers with average hourly wages
either below $5.00, or above the 99th percentile ($24.79).
There are far fewer significant changes between MSAs in the annual
hospital wage index. The latest comparison of the year-to-year
differences in the hospital wage index (pre-classified, pre-floor)
shows only 7 areas with increases of 10 percent or more and 4 with
decreases greater than 10 percent. A comparison of the FY 1998 and 1999
SNF-specific wage indexes shows 34 areas that experienced an increase
of 10 percent or more and 27 areas with decreases of 10 percent or
more.
We believe that any changes to the wage index adjustment under the
SNF PPS should support greater precision in Medicare payments; however,
as a result of the variations in the SNF-specific wage data and the
large number of SNFs that are unable to provide adequate wage and
hourly data, we are concerned about the reliability of the data used in
establishing a SNF wage index at this time.
We continue to believe that a wage index based on hospital wage
data is the best and most appropriate to use in adjusting payments to
SNFs, since both hospitals and SNFs compete in the same labor markets.
We invite public comment on the SNF-specific wage data; however, for
the reasons discussed above we currently plan to use the updated
hospital wage data when we publish the final rule. In addition, in
accordance with section 315(b) of BIPA 2000, since we currently do not
have reliable SNF-specific wage data, we are not proposing at this time
to develop or incorporate any type of geographic reclassification
system for SNFs.
D. Updates to the Federal Rates
In accordance with section 1888(e)(4)(E) of the Act and section 311
of BIPA 2000, the proposed payment rates listed here reflect an update
equal to the SNF market basket minus 0.5 percentage point, which equals
2.4 percent. For each succeeding FY, we will publish the rates in the
Federal Register before August 1 of the year preceding the affected
Federal FY.
E. Relationship of RUG-III Classification System to Existing Skilled
Nursing Facility Level-of-Care Criteria
As discussed in Sec. 413.345, we include in each update of the
Federal payment rates in the Federal Register the designation of those
specific RUGs under the classification system that represent the
required SNF level of care, as provided in Sec. 409.30. This
designation reflects an administrative presumption that beneficiaries
who are correctly assigned to one of the upper 26 RUG-III groups in the
initial 5-day, Medicare-required assessment are automatically
classified as meeting the SNF level of care definition up to that
point.
Those beneficiaries assigned to any of the lower 18 groups are not
automatically classified as either meeting or not meeting the
definition, but instead receive an individual level of care
determination using the existing administrative criteria. This
presumption recognizes the strong likelihood that beneficiaries
assigned to one of the upper 26 groups during the immediate post-
hospital period require a covered level of care, which would be
significantly less likely for those beneficiaries assigned to one of
the lower 18 groups.
We propose to continue the existing designation of the upper 26
RUG-III groups for purposes of this administrative presumption,
consisting of the following RUG-III classifications: all groups within
the Ultra High Rehabilitation category; all groups within the Very High
Rehabilitation category; all groups within the High Rehabilitation
category; all groups within the Medium Rehabilitation category; all
groups within the Low Rehabilitation category; all groups within the
Extensive Services category; all groups within the Special Care
category; and, all groups within the Clinically Complex category.
F. Three-Year Transition Period
As noted previously, the rates that we now propose are for the
fourth year of the SNF PPS. As a result, the PPS is no longer operating
under the initial three-year transition period from facility-specific
to Federal rates and, therefore, now equals 100 percent of the adjusted
Federal per diem rate.
G. Example of Computation of Adjusted PPS Rates and SNF Payment
Using the XYZ SNF described in Table 9A, the following shows the
adjustments made to the Federal per diem rate to compute the provider's
actual per diem PPS payment. XYZ's 12-month cost reporting period
begins October 1, 2001. Table 9B displays the 44 RUG-III categories and
their respective add-ons, as provided in BBRA 1999 and BIPA 2000.
[[Page 24012]]
Table 9.A.--SNF XYZ From Above Is Located in State College, PA With a Wage Index of 0.9038
--------------------------------------------------------------------------------------------------------------------------------------------------------
Labor Adjusted Nonlabor Adjusted Percent Medicare
RUG group portion Wage index labor portion rate adjustment days Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
RVC....................................... $257.54 0.9038 $232.76 $84.14 $316.90 $350.81 50 $17,541
SSC....................................... 171.76 0.9038 155.24 56.12 211.36 \3\ 262.09 25 6,552
IA2....................................... 113.56 0.9038 102.64 37.10 139.74 \4\ 145.33 25 3,633
-------------------------------------------------------------------------------------------------------------
Total............................... ........... ........... ........... ........... ........... ........... 100 27,726
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ From Table 5.
\2\ Reflects a 10.7 percent adjustment (the 4 percent adjustment from section 101(d) of BBRA 1999 and the 6.7 percent adjustment from section 314 of
BIPA 2000).
\3\ Reflects a 24 percent adjustment (the 4 percent and 20 percent adjustments from sections 101(a) and (d) of BBRA 1999).
\4\ Reflects the 4 percent adjustment from section 101(d) of BBRA 1999.
Table 9.B.--BBRA 1999 & BIPA 2000 Add-Ons, by RUG-III Category
------------------------------------------------------------------------
RUG-III category 4% \1\ 10.7% 24% \3\
---------------------------------------------------------\2\------------
RUC....................................... X
RUB....................................... X
RUA....................................... X
RVC....................................... X
RVB....................................... X
RVA....................................... X
RHC....................................... X
RHB....................................... X
RHA....................................... X
RMC....................................... X
RMB....................................... X
RMA....................................... X
RLB....................................... X
RLA....................................... X
SE3....................................... X
SE2....................................... X
SE1....................................... X
SSC....................................... X
SSB....................................... X
SSA....................................... X
CC2....................................... X
CC1....................................... X
CB2....................................... X
CB1....................................... X
CA2....................................... X
CA1....................................... X
IB2....................................... X
IB1....................................... X
IA2....................................... X
IA1....................................... X
BB2....................................... X
BB1....................................... X
BA2....................................... X
BA1....................................... X
PE2....................................... X
PE1....................................... X
PD2....................................... X
PD1....................................... X
PC2....................................... X
PC1....................................... X
PB2....................................... X
PB1....................................... X
PA2....................................... X
PA1....................................... X
------------------------------------------------------------------------
\1\ From BBRA 1999.
\2\ Includes the 4% increase from BBRA 1999 and the 6.7% increase from
BIPA 2000.
\3\ Includes the 4% and 20% increases from BBRA 1999.
For rates addressed in this proposed rule, we are using wage index
values that are based on hospital wage data from cost reporting periods
beginning in FY 1996, the same wage data as used to compute the FY 2001
wage index values for the SNF PPS. We will incorporate updated wage
data in the final rule for the FY 2002 SNF PPS update. XYZ's total PPS
payment will equal $27,726.
III. The Skilled Nursing Facility Market Basket Index
A. Background
Section 1888(e)(5)(A) of the Act requires the Secretary to
establish a market basket index that reflects changes over time in the
prices of an appropriate mix of goods and services included in the SNF
PPS. Effective for cost reporting periods beginning on or after July 1,
1998, we revised and rebased our 1977 routine costs input price index
and adopted a total expenses SNF input price index using data from 1992
as the base year.
The term ``market basket'' technically describes the mix of goods
and services needed to produce SNF care, and is also commonly used to
denote the input price index that includes both weights (mix of goods
and services) and price factors. The term ``market basket'' used in
this proposed rule refers to the SNF input price index.
The 1992-based SNF market basket represents routine costs, costs of
ancillary services and capital-related costs. The percentage change in
the market basket reflects the average change in the price of a fixed
set of goods and services purchased by SNFs to furnish all services.
For further background information, see the May 12, 1998 Federal
Register (63 FR 26289).
For purposes of SNF PPS, the SNF market basket is a fixed-weight
(Laspeyres type) price index. (A Laspeyres type index compares the cost
of purchasing a specified group of commodities at current prices to the
cost of purchasing that same group in a selected base period.) The SNF
market basket is constructed in three steps. First, a base period is
selected and total base period expenditure shares are estimated for
mutually exclusive and exhaustive spending categories. Total costs for
routine services, ancillary services, and capital are used. These
proportions are called ``cost'' or ``expenditure weights''. The second
step is to match each expenditure category to a price/wage variable,
called a price proxy. These price proxy variables are drawn from
publicly available statistical series published on a consistent
schedule, preferably at least quarterly. In the final step, the price
level for each spending category is multiplied by the expenditure
weight for that category. The sum of these products (that is, weights
multiplied by proxy index levels) for all cost categories yields the
composite index level in the market basket for a given quarter or year.
Repeating the third step for other quarters and years produces a time
series of market basket index levels, from which rates of growth can be
calculated.
The market basket is described as a fixed-weight index because it
answers the question of how much more or less it would cost, at a later
time, to purchase the same mix of goods and services that was purchased
in the base period. The effects on total expenditures resulting from
changes in the quantity or mix of goods and services purchased
subsequent or prior to the base period are, by design, not considered.
As discussed in the May 12, 1998 Federal Register (63 FR 26252), to
implement section 1888(e)(5)(A) of the Act, we have revised and rebased
the market basket so the cost weights and price proxies reflected the
mix of goods and services that SNFs purchase for all costs (routine,
ancillary, and capital-related) encompassed by SNF PPS in fiscal year
1992.
B. Rebasing and Revising the Skilled Nursing Facility Market Basket
The terms ``rebasing'' and ``revising'', while often used
interchangeably, actually denote different activities. Rebasing means
shifting the base year for the structure of costs of the input
[[Page 24013]]
price index (for example, for this proposed rule, we would shift the
base year cost structure from fiscal year 1992 to fiscal year 1997).
Revising means changing data sources, cost categories, and/or price
proxies used in the input price index.
We are proposing to rebase and revise the SNF market basket to
reflect 1997 total cost data (routine, ancillary, and capital-related).
Fiscal year 1997 was selected as the new base year because 1997 is the
most recent year for which relatively complete data are available.
These data include settled 1997 Medicare Cost Reports as well as 1997
data from two U.S. Department of Commerce surveys: the Bureau of the
Census' Business Expenditures Survey, and the Bureau of Economic
Analysis' Annual Input-Output tables. Preliminary analysis of 1998 data
from Medicare Cost Reports showed little change in cost shares from
those in the 1997 Medicare Cost Reports.
In developing the proposed market basket, we reviewed SNF
expenditure data from Medicare Cost Reports for FY 1997 for each
freestanding SNF that had Medicare expenses. FY 1997 Cost Reports are
those with cost reporting periods beginning after September 30, 1996
and before October 1, 1997. We maintained our policy of using data from
freestanding SNFs because they reflect the actual cost structure faced
by the SNF itself. By contrast, expense data for a hospital-based SNF
is influenced by the allocation of overhead over the entire
institution.
Data on SNF expenditures for six major expense categories (wages
and salaries, employee benefits, contract labor, pharmaceuticals,
capital-related, and a residual ``all other'') were edited and
tabulated. Using these data, we then determined the proportion of total
costs that each category represented. The six major categories for the
revised and rebased cost categories and weights derived from SNF
Medicare Cost Reports are summarized in Table 10.A.
Table 10.A.--1992 and Proposed 1997 Skilled Nursing Facility Major Cost
Categories and Weights From Medicare Cost Reports
------------------------------------------------------------------------
1992-based Proposed 1997-
skilled based skilled
nursing nursing
Cost categories facility facility
weights weights
(percent) (percent)
------------------------------------------------------------------------
Wages and Salaries...................... 47.805 46.889
Employee Benefits....................... 10.023 9.631
Contract Labor.......................... 12.852 6.478
Pharmaceuticals......................... 2.531 3.006
Capital-related Costs................... 9.778 9.877
All Other Costs......................... 17.012 24.119
-------------------------------
Total Costs....................... 100.000 100.000
------------------------------------------------------------------------
We fully discuss the methodology for developing these weights in
the Appendix. The main methodological difference between the 1992-based
SNF market basket and the proposed 1997-based market basket is in the
calculation of the contract labor weight. For the 1992-based market
basket, we estimated this share using non-salary costs for therapy cost
centers. For the proposed 1997-based index, we used the contract labor
amounts for a subset of edited reports from Worksheet S-3 in the
Medicare Cost Reports. We believe this new methodology provides a more
accurate reflection of the share of total costs that are attributable
to contract labor. The data from this worksheet were not available in
the 1992 Medicare Cost Reports.
Relative weights within the six major categories were derived using
relative cost shares from the Bureau of the Census' 1997 Business
Expenditures Survey (BES), 1997 Medicare Cost Reports, and the Bureau
of Economic Analysis' (BEA) 1997 Annual Input-Output tables. They were
used to disaggregate and allocate costs within the six major categories
determined from the 1997 SNF Medicare Cost Reports. The BEA Input-
Output database is benchmarked at 5-year intervals and updated annually
between benchmarks. We are using the annual update for 1997. The BES is
updated every five years.
The capital-related portion of the proposed rebased and revised SNF
PPS market basket employs the same overall methodology used to develop
the capital-related portion of the 1992-based SNF market basket,
described in the May 12, 1998 Federal Register (63 FR 26289). It is
also the same methodology used for the inpatient hospital PPS capital
input price index described in the Federal Register May 31, 1996 (61 FR
27466) and August 30, 1996 (61 FR 46196). The strength of this
methodology is that it reflects the vintage nature of capital, which
represents the acquisition and use of capital over time.
Our work resulted in 21 separate categories for the proposed
rebased and revised SNF market basket. The 1992-based total cost SNF
market basket also had 21 separate cost categories. Detailed
descriptions of each cost category and respective price proxy in the
proposed 1997-based SNF market basket are provided in the Appendix to
this proposed rule.
As in the 1992-based SNF market basket, the proposed 1997-based SNF
market basket does not include a separate cost category for
professional liability insurance. Our analysis of the BEA 1997 Annual
Input-Output survey indicated that the general category for insurance
carriers (which includes professional liability insurance as a subset)
was, at just 0.2 percent, a small share of the total costs in 1997. It
has been our policy in the past not to provide detailed breakouts of
cost categories unless they represent a significant portion of the
providers' costs. We also reviewed data available on professional
liability insurance from Worksheet S-2 of the SNF Medicare Cost
Reports, but found that nearly all SNFs did not report data for
malpractice premiums, paid losses, or self-insurance in 1997.
Professional liability insurance is included with other insurance
paid to carriers in the all other labor-intensive services cost
category. We are soliciting comments on possible data sources for
professional liability insurance costs for SNFs. Recent indications are
that professional liability insurance costs for SNFs are rising
quickly. We are looking both for information that would be
[[Page 24014]]
available for a cost weight as well as for a time-series of
professional liability premiums for a constant level of coverage,
similar to the data we currently collect for hospitals and physicians
from a small sample of insurance carriers.
After the 21 cost weights for the proposed revised and rebased SNF
market basket were developed, we selected the most appropriate wage and
price proxies currently available to monitor the rate of change for
each expenditure category. With three exceptions (all for the capital-
related expenses cost category), the wage and price proxies are based
on Bureau of Labor Statistics (BLS) data and are grouped into one of
the following BLS categories:
Employment Cost Indexes. Employment Cost Indexes (ECIs)
measure the rate of change in employment wage rates and employer costs
for employee benefits per hour worked. These indexes are fixed-weight
indexes and strictly measure the change in wage rates and employee
benefits per hour. They are not affected by shifts in occupation or
industry mix. ECIs are superior to Average Hourly Earnings (AHEs) as
price proxies for input price indexes for two reasons: (1) They measure
pure price change, and (2) they are available by both occupational
group and by industry.
Producer Price Indexes. Producer Price Indexes (PPIs)
measure price changes for goods sold in other than retail markets. PPIs
were used when the purchases of goods or services were made at the
wholesale level.
Consumer Price Indexes. Consumer Price Indexes (CPIs)
measure change in the prices of final goods and services bought by
consumers. CPIs were only used when the purchases were similar to those
of retail consumers rather than purchases at the wholesale level, or if
no appropriate PPI was available.
The contract labor weight of 6.478 was reallocated to (1) wages and
salaries, and (2) employee benefits, so that the same price proxies
that we propose to use for direct labor costs are applied to contract
costs. While we understand that the level of unit labor costs for
contract labor can differ from the unit labor costs of a SNF employee,
we feel that the rate at which these labor costs change should be
similar. That is, unit contract labor costs should not grow any more or
less rapidly than SNF employee labor costs. The rebased and revised
cost categories, weights, and price proxies for the proposed 1997-based
SNF market basket are listed in Table 10.B.
Table 10.B.--Proposed 1997-Based SNF Market Basket Cost Categories,
Weights, and Price Proxies
------------------------------------------------------------------------
1997-based
skilled
nursing
Cost category facility Price proxy
market basket
weight
------------------------------------------------------------------------
Operating Expenses............. 90.123
Compensation................... 62.998
Wages and Salaries......... 52.263 ECI for Wages and
Salaries for Private
Nursing Homes.
Employee benefits.......... 10.734 ECI for Benefits for
Private Nursing Homes.
Nonmedical professional fees... 2.634 ECI for Compensation
for Private
Professional,
Technical and
Specialty workers.
Utilities...................... 2.368
Electricity................ 1.420 PPI for Commercial
Electric Power.
Fuels, nonhighway.......... 0.426 PPI for Commercial
Natural Gas.
Water and sewerage......... 0.522 CPI-U for Water and
Sewarge.
Other Expenses................. 22.123
Other Products................. 13.522
Pharmaceuticals............ 3.006 PPI for Prescription
Drugs.
Food....................... 4.136
Food, wholesale 3.198 PPI for Processed
purchase. Foods.
Food, retail purchase.. 0.937 CPI-U for Food Away
From Home.
Chemicals.................. 0.891 PPI for Industrial
Chemicals.
Rubber and plastics........ 1.611 PPI for Rubber and
Plastic Products.
Paper products............. 1.289 PPI for Converted Paper
and Paperboard.
Miscellaneous products..... 2.589 PPI for Finished Goods
less Food and Energy.
Other Services................. 8.602
Telephone Services......... 0.448 CPI-U for Telephone
Services.
Labor-intensive Services... 4.094 ECI for Compensation
for Private Service
Occupations.
Non labor-intensive 4.059 CPI-U for All Items.
services.
Capital-related Expenses....... 9.877
Total Depreciation............. 5.266
Building & Fixed Equipment. 3.609 Boeckh Institutional
Construction Index
(vintage-weighted over
23 years).
Movable Equipment.......... 1.657 PPI for Machinery &
Equipment (vintage-
weighted over 10
years).
Total Interest................. 3.852
Government & Nonprofit SNFs 1.890 Average Yield Municipal
Bonds (Bond Buyer
Index-20 bonds)
(vintage-weighted over
22 years).
For-Profit SNFs............ 1.962 Average Yield Moody's
AAA Bonds (vintage-
weighted over 22
years).
Other Capital-related Expenses. 0.760 CPI-U for Residential
Rent.
----------------
0Total................... * 100.000
------------------------------------------------------------------------
* Total may not equal 100 due to rounding
[[Page 24015]]
In the proposed 1997-based SNF market basket, the labor-related
share for FY 1997 is 73.588 percent, while the non-labor-related share
is 26.412 percent. The labor-related share reflects the proportion of
the average SNF's costs that vary with local area wages. This share
includes wages and salaries, employee benefits, professional fees,
labor-intensive services, and a 39.1 percent share of capital-related
expenses, as shown in Table 10.C. By comparison, the labor-related
share of the 1992-based SNF market basket was 75.888 percent. The
labor-related share of the market basket is the sum of the weights for
those cost categories that are influenced by the local labor market.
The labor-related share is calculated from the base year, which for the
proposed SNF market basket is FY 1997.
The labor-related share for capital-related expenses was estimated
using a statistical analysis of individual SNF Medicare Cost Reports
for 1997, similar to the analysis done on the 1992 SNF Medicare Cost
Reports and explained in the May 12, 1998 Federal Register (63 FR
26289). The statistical analysis was necessary because the proportion
of capital-related expenses related to local area wage costs cannot be
directly determined from the SNF capital-related portion of the market
basket. We used regression analysis with total costs per day in SNFs as
the dependent variable and relevant explanatory variables for size,
complexity, efficiency, age of capital, and local wage variation. To
account for these factors, we used number of beds, case-mix indexes,
occupancy rate, ownership, age of assets, length of stay, FTEs per bed,
and wage index values based on the hospital wage index (wages and
employee benefits) as independent variables. Our regression analysis
indicated that the coefficient on the area wage index was 73.588, which
represents the proportion of total costs that vary with local labor
markets, holding constant other factors. From the operating portion of
the market basket, we can specifically identify cost categories that
reflect local labor markets and include them in the labor-related
share. These cost categories equal 69.727, and reflect approximately 77
percent of operating costs. Thus, the labor-related share for capital-
related costs is 3.861 (73.588 minus 69.727), and reflects
approximately 39 percent of capital-related costs.
Capital-related expenses are determined in some proportion by local
area labor costs (such as construction worker wages and building
materials costs) that are reflected in the price of the capital asset.
However, many other inputs that determine capital costs are not related
to local area wage costs, such as equipment prices and interest rates.
Thus, it is appropriate that capital-related expenses would vary less
with local wages than would operating expenses for SNFs. Therefore, we
are proposing to use this analysis in determining the labor-related
share for SNF PPS.
All price proxies for the proposed revised and rebased SNF market
basket are listed in Table 10.B and summarized in the Appendix to this
proposed rule. A comparison of the yearly historical percent changes
from FY 1995 through FY 2000 for the current 1992-based market basket
and the proposed 1997-based market basket is shown in Table 10.D.
Table 10.C.--1992 and Proposed 1997-Based Labor-Related Share
------------------------------------------------------------------------
1992-based Proposed 1997-
skilled based skilled
nursing nursing
Cost category facility facility
market basket market basket
weight weight
------------------------------------------------------------------------
Wages and Salaries...................... 54.262 52.263
Employee Benefits....................... 12.797 10.734
Nonmedical Professional Fees............ 1.916 2.634
Labor-intensive Services................ 3.686 4.094
Capital-related......................... 3.227 3.861
Total............................. 75.888 73.588
-------------------------------
------------------------------------------------------------------------
Table 10.D.--Comparison of the 1992-Based Skilled Nursing Facility
Market Basket and the Proposed 1997-Based Skilled Nursing Facility
Market Basket, Percent Changes, 1995-2000
------------------------------------------------------------------------
1992-based Proposed 1997-
skilled based skilled
Fiscal years beginning October 1 nursing nursing
facitlity facility
market basket market basket
------------------------------------------------------------------------
Historical:
October 1994, FY 1995............... 2.9 3.0
October 1995, FY 1996............... 2.7 2.7
October 1996, FY 1997............... 2.4 2.4
October 1997, FY 1998............... 2.8 2.8
October 1998, FY 1999............... 3.1 3.0
October 1999, FY 2000............... 4.1 4.0
Historical average 1995-2000:........... 3.0 3.0
------------------------------------------------------------------------
Released by HCFA, OACT, National Health Statistics Group.
The historical average rate of growth for 1995 through 2000 for the
proposed SNF 1997-based market basket is similar to that of the 1992-
based market basket. The proposed 1997-based SNF market basket provides
a more current measure of the annual price increases for total care
than the 1992-based SNF market basket because the cost weights reflect
the structure of costs for the most recent year for which there are
relatively complete data. The forecasted rates of
[[Page 24016]]
growth for FY 2002 for the proposed 1997-based and current 1992-based
SNF market basket are shown in Table 10.E.
Table 10.E.--Comparison of Forecasted Change for the 1992-Based Skilled
Nursing Facility Market Basket, and the Proposed 1997-Based Skilled
Nursing Facility Market Basket Percent Change for FY 2002
------------------------------------------------------------------------
1992-based 1997-based
skilled nursing skilled nursing
Fiscal Year beginning October 1 facility market facility market
basket basket
------------------------------------------------------------------------
October 2001, FY 2002................. 3.0 2.9
------------------------------------------------------------------------
Source: Standard & Poor's DRI HCC, 1st QTR, 2001; @ USMARCRO/
MODTREND@CISSIM/TRENDLONG0201.
Released by HCFA, OACT, National Health Statistics Group.
IV. Update Framework
A. The Need for an Update Framework
Medicare payments to SNFs are based on a predetermined national
payment amount per day. Annual updates to these payments are required
by section 1888(e) of the Act. These updates are usually based on the
increase in the SNF market basket. For FY 2002, the update is set at
market basket minus 0.5 percent. Our goal is to develop a method for
analyzing and comparing expected trends in the underlying cost per day
to use in establishing these updates.
The SNF market basket, or input price index, developed by HCFA's
Office of the Actuary (OACT) is just one component in the SNF cost per
day amount. It captures only the pure price change of inputs (labor,
materials, and capital) used by the SNF to produce a constant quantity
and quality of care. Other factors also contribute to the change in
costs per day, which include changes in case-mix, intensity, and
productivity.
Under the inpatient hospital PPS, HCFA and MedPAC use an update
framework to account for these other factors and to make annual
recommendations to the Congress concerning the magnitude of the update.
We are currently examining these factors and exploring ways that they
could be incorporated into an update framework for the SNF PPS. We are
also examining some additional conceptual and data issues that must be
considered when the framework is constructed and applied.
We are not proposing to apply an update framework in a
recommendation to the Congress at this time. We are actively pursing
development efforts aimed at producing an analytical framework which,
by informing policy makers concerning the magnitude of annual updates,
would support the continued appropriateness and relevance of the
payment rates for services provided to beneficiaries in SNFs. To this
end, we are requesting comments concerning the conceptual approach we
have outlined in this proposed rule, including the utility and
feasibility of this approach for SNFs. We are specifically interested
in comments concerning whether certain factors should be accounted for
in the framework, and suggestions concerning potential data sources and
analysis to support the model. As with the existing methodology, the
features of a SNF-specific update framework would need to be based on a
sound policy and methodology.
B. Factors Inherent in SNF Payments per Day
In order to understand the factors that determine SNF costs per
day, it is first necessary to understand the factors that determine SNF
payments per day. Payments per day under SNF PPS are based on the cost
and an implicit normal profit margin to the SNF in providing an
efficient level of care. We have developed a methodology to identify a
mutually exclusive and exhaustive set of factors included in SNF
payments per day. The discussion here details a set of equations to
identify these factors.
In its simplest form, the average payment per day to a SNF can be
separated into a cost term and a profit term as shown in equation (1):
[GRAPHIC] [TIFF OMITTED] TP10MY01.000
This equation can be made multiplicative by converting profit per
day into a profit rate as shown in equation (2):
[GRAPHIC] [TIFF OMITTED] TP10MY01.001
An output price term can be introduced into the equation by
multiplying and dividing through by input prices and productivity. As
shown in equation (3), the term inside the brackets represents the
output price, since an output price reflects the input price and profit
margin adjusted for productivity:
[GRAPHIC] [TIFF OMITTED] TP10MY01.002
The cost per day term can be further separated by accounting for
real case-mix. Under SNF PPS, Resource Utilization Groups (RUGs) are
used to classify patients. Based on accurate RUG classification data,
average real case-mix per day can be incorporated, as shown in equation
(4):
[GRAPHIC] [TIFF OMITTED] TP10MY01.003
[[Page 24017]]
The term ``real'' is imperative here because only true case-mix
should be measured, not case-mix caused by improper coding behavior. By
rearranging the terms in equation (4), a set of mutually exclusive and
exhaustive factors such as those shown in equation (5) can be
identified:
[GRAPHIC] [TIFF OMITTED] TP10MY01.004
The term of the equation in brackets can be analyzed in two steps.
First, excluding the productivity term from the equation results in
case-mix adjusted real cost per day, which is input intensity per day.
Second, multiplying input intensity by productivity results in case-mix
adjusted real payment per day, or output intensity per day. The
rationale behind this step is explained in detail in the next section.
The result of this exercise is that SNF payment per day can be
determined from the following factors:
[GRAPHIC] [TIFF OMITTED] TP10MY01.005
Thus, it holds that the change in SNF payment per day is a function
of the change in these factors. In order to determine an annual update
that most accurately reflects the underlying cost to the SNF of
efficiently providing care, the four factors related to cost must be
accounted for when an update framework is developed. A brief discussion
of each factor, including specific conceptual and data issues, is
provided in the next section.
C. Defining Each Factor Inherent in SNF Costs per Day
Each cost factor from equation (6) above is discussed here in
detail. Because this is a basic conceptual discussion, it is likely
that more detailed issues may be relevant that are not explored here.
1. Input Prices
Input prices are the pure prices of inputs used by the SNF in
providing services. When we refer to inputs we are referring to costs,
which have both a price and a quantity component. The price is an input
price, and the quantity component reflects real inputs, or real costs.
Similarly, when we refer to outputs, we are referring to payments,
which also have both a price and a quantity component. The price
component is the transaction output price, and the quantity component
is the real output, or real payment. The real inputs include labor,
capital, and materials, such as drugs. By definition, an input price
reflects prices that SNFs encounter in purchasing these inputs, whereas
an output price reflects the prices that buyers encounter in purchasing
SNF services. We currently can measure input prices using the SNF
market basket.
2. Productivity
Productivity measures the efficiency of the SNF in producing
outputs. It is the amount of real outputs, or real payments, that can
be produced from a given amount of real inputs, or real costs. For
SNFs, these inputs are in the form of both labor and capital; thus,
they represent multi-factor productivity, as not just labor
productivity is reflected. The following set of equations shows how
multi-factor productivity can be measured in terms of available data,
such as payments, costs, and input prices:
[GRAPHIC] [TIFF OMITTED] TP10MY01.006
Rearranging the terms, this multi-factor productivity equation was
used as the basis for incorporating an output price term in equation
(3) above. This equation is the basis for understanding the
relationship between input prices, output prices, profit margins, and
productivity.
Equation (6) shows that productivity is divided through the
equation, offsetting other factors. The theory behind this offset is
that if an efficient SNF in a competitive market can produce more
output with the same amount of inputs, the full increase in input costs
does not have to be passed on by the provider to maintain a normal
profit margin.
3. Real Case-Mix per Day
Real case-mix per day is the average overall mix of care provided
by the SNF, as measured using the RUG classification system. Over time,
a measure of real case-mix will change as care is given in more or less
complex RUGs. Changes in the level of care within a RUG classification
group would not be reflected in a case-mix measure based on RUGs, but
instead should be captured in the intensity factor of equation (6).
The important distinction here is the difference between real and
nominal case-mix. SNFs submit claims using the RUG classification
system. The case-mix reflected by the claims is considered ``nominal''.
However, the reported classification can reflect the true level of care
provided or improper coding behavior. An example of improper coding
behavior would be the upcoding, or case-mix ``creep,'' that took place
when the hospital PPS was implemented. Any change in case-mix that is
not associated with the actual level of care or a true change in the
level of care provided must be excluded in order to determine real
case-mix. Section 1888(e)(4)(F) of the Act provides us with the
statutory authority to make adjustments to the unadjusted Federal per
diem rates for changes caused by case-mix creep.
[[Page 24018]]
4. Case-Mix-Constant Real Output Intensity per Day
Intensity is the true underlying nature of the product or service
and can take the form of output and/or input intensity. In the case of
SNFs, output intensity per day is associated with real payment per day,
while input intensity per day is associated with real cost per day. For
example, input intensity would be associated with a therapist's hours
when providing treatment, whereas output intensity would be associated
with the amount of treatments a therapist provides. The underlying
nature of SNF services is determined by such factors as technological
capabilities, increased utilization of inputs (such as labor or drugs),
site of care, and practice patterns. Because these factors can be
difficult to measure, intensity per day is usually calculated as a
residual after the other factors from equation (6) have been accounted
for.
Accounting for output intensity associated with an efficient SNF
can be more accurately analyzed using a SNF's costs rather than its
payments. This analysis would also provide an alternative to developing
or using a transaction output price index, which has been difficult for
the Bureau of Labor Statistics (BLS) to measure for SNFs. The following
series of equations shows how to use the definition of an output price
as defined earlier to convert the equation for output intensity per day
to reflect costs instead of payments, as used in equation (6):
[GRAPHIC] [TIFF OMITTED] TP10MY01.007
The last equation is identical to the term in brackets in equation
(5), case-mix-constant real input intensity per day multiplied by
productivity. Thus, output intensity per day can be defined in such a
way that cost data from the SNF are utilized. This equation can be
broken down even further to account for different types of input
intensity per day. We discuss this matter more fully in the next
section.
D. Applying the Factors That Affect SNF Costs per Day in an Update
Framework
As discussed earlier, payments per day under SNF PPS must be
updated each year. Currently, the updates are specified by legislation
as the percent change in the SNF market basket for FY 2001, the percent
change in the SNF market basket minus 0.5 percentage points for FY 2002
and FY 2003, and the percent change in the SNF market basket
thereafter. However, it is important to understand the underlying
trends in SNF costs per day for an efficient provider, especially
should the change in these costs deviate from the legislated updates.
The development of an update framework with a sound conceptual basis
will provide this capability.
Earlier, factors inherent in SNF costs per day were identified.
Changes in these factors determine the change in SNF costs per day.
Fitting these factors into a framework would allow us to recommend
updates each year that appropriately reflect changes in underlying
costs for efficient SNFs. Accounting for each of these factors from
equation (6) under SNF PPS is discussed below:
Change in case-mix constant real output intensity per day
would be accounted for in the update framework, reflecting the factors
that affect not only case-mix constant real input intensity per day,
but also productivity, which is determined separately. Factors that can
cause changes in case-mix constant real input intensity per day
include, but are not limited to, changes in site of service, changes in
within-RUG case-mix, changes in practice patterns, changes in the use
of inputs, and changes in technology available.
As discussed earlier, changes in nominal case-mix are
automatically included in the payment to the SNF. However, the law
gives us the authority to make adjustments for case-mix change due to
improper coding behavior. Therefore, the update framework should
include an adjustment to convert changes in nominal case-mix per day to
changes in real case-mix per day.
Change in multi-factor productivity would be accounted for
in the update framework. The availability of historical data on input
prices, payments, and costs are useful in the analysis of this factor.
MedPAC sets this factor as a target under hospital PPS.
Changes in input prices for labor, material, and capital
would be accounted for in the update framework. Our Office of the
Actuary currently has an input price index, or market basket, for SNF
services. This is the market basket referred to in the legislated
updates. In an update framework, a
[[Page 24019]]
forecast error adjustment has typically been included, to reflect that
the updates are set prospectively and some degree of forecast error is
inevitable. In the case of the inpatient hospital PPS, this adjustment
is made on a two-year lag and only if the error exceeds a defined
threshold (0.25 percentage points).
E. Current HCFA Inpatient Hospital PPS and Illustrative SNF PPS Payment
Update Frameworks
Table 11 shows the payment update framework for the current
inpatient hospital PPS and an illustrative update framework for the SNF
PPS. Some of the factors in the inpatient hospital PPS framework are
computed using the Medicare Cost Report data, while others are
determined based on policy considerations. The details of calculating
each factor for the inpatient hospital PPS framework can be found in
the August 1, 2000 Federal Register (65 FR 47054) final rule that set
forth updates to the payment rates used under the inpatient PPS. This
design for a SNF update framework is for illustrative purposes only, as
much more work needs to be done to determine the appropriate level of
detail for each factor and the manner in which the factors would be
developed through policy. The numbers provided for the hospital update
are only intended to serve as examples of prior updates recommended for
the hospital PPS.
MedPAC supports the use of this type of framework for updating
payments and applies a similar framework when it proposes updates to
hospital payments in its annual recommendation to Congress. The
appropriateness of this framework for updating inpatient hospital
payments was discussed in the Health Care Financing Review, Winter
1992, in an article entitled, ``Are PPS Payments Adequate? Issues for
Updating and Assessing Rates.'' A similar framework would be useful for
analyzing updates to SNF payments.
Table 11.--Current HCFA Hospital PPS and Illustrative SNF PPS Payment
Update Frameworks
------------------------------------------------------------------------
FY 2001 calculated
HCFA hospital PPS update hospital update Illustrative SNF PPS
percent change update
------------------------------------------------------------------------
Percent Change in:
HCFA PPS Hospital Market 3.4................. HCFA SNF Market
Basket. Basket.
Forecast Error.......... 0.0................. Forecast Error.
Productivity............ -0.5 to -0.4........ Productivity.
Output Intensity............ 0.0 to -0.6......... Output Intensity:
Science and Technology.. .................... Science and
Technology
Practice Patterns.......
Real within-DRG Change.. .................... Real within-RUG
Change.
Site of Service......... .................... Utilization of
Inputs.
Site of Service.
Case-mix Adjustment Factors: .................... Case-mix
Adjustment Factors:
Projected Case-mix...... -0.5................ Nominal across-RUG
Case-mix.
Real across-DRG Change.. 0.5................. Real across-RUG
Change.
Total Cost per Admission.... -0.5 to -1.0........ Total per Diem
Cost.
Other Policy Factors: .................... Other Policy
Factors:
Reclassification and 0.0................. None.
Recalibration.
Total Calculated Update 2.4 to 2.9.......... Total Calculated
Update.
------------------------------------------------------------------------
Table data derived from the August 1, 2000 Federal Register, Medicare
Program; Changes to the Hospital Inpatient Prospective Payment System
and Fiscal Year 2001 Rates; Final Rule.
F. Additional Conceptual and Data Issues
Three conceptual issues specific to the SNF PPS are the relevance
of a site-of-service substitution adjustment, the necessity of an
adjustment for RUG reclassification, and the handling of one-time
factors.
Under the inpatient hospital PPS, a site-of-service substitution
factor (captured as part of intensity) was necessary because of the
incentive to shift care from hospital inpatient to such other settings
as hospital outpatient, SNFs, or home health agencies (HHAs). For SNF
PPS, it must be determined whether incentives to shift care to these
other settings will continue or whether the SNF PPS will reduce these
incentives and/or create alternative incentives to shift care out of
SNFs. It is not clear without additional research in this area whether
changes in behavior created by the different Medicare payment systems
should be reflected in a SNF update framework.
A reclassification and recalibration adjustment under the inpatient
hospital PPS is necessary to account for additional changes in the
case-mix factor resulting from reclassifying and recalibrating the DRG
classification software. This factor is applied to the current fiscal
year update, but reflects the effect of revisions in the fiscal year
two years prior. MedPAC does not account for this adjustment in its
update framework. Whether a RUG reclassification adjustment would be
necessary in the update framework would depend on the data availability
and the likelihood of revisions to RUG classifications on a periodic
basis.
There is also a question about how to handle one-time factors, such
as the increased costs of converting computer systems to Year 2000
(Y2K) compliance. An update framework is the appropriate mechanism to
account for these items, but because of uncertainty surrounding their
impact on costs, determining an appropriate adjustment amount may be
difficult. MedPAC has discussed this issue in prior sessions, but was
unable to agree on the exact methodology for these types of factors.
The purpose of this conceptual discussion is not to determine how
the identified factors of the update framework would be measured. We do
recognize, however, that it would be important to use the Medicare Cost
Report (MCR) and other relevant data from SNFs to analyze the factors
that would account for growth in costs per day. As was the case for the
inpatient hospital PPS, we will be required to make optimal use of the
MCR data as we proceed in the development of an update framework
methodology.
The lack of historical case-mix data is another important issue.
These data are
[[Page 24020]]
currently being collected under contract but will not be available for
most historical years. This factor may prove difficult to account for
in a historical analysis. In addition, there is no information
currently available to make the distinction between real and nominal
case-mix change. There are also concerns about the BLS output price
measures for SNFs, especially during the first years of publication in
1996 and 1997. Output prices are relevant for measuring productivity in
a historical context. Most of these concerns were also encountered and
addressed in the inpatient hospital PPS update framework.
The discussion here provides the conceptual basis for developing an
update framework for SNF PPS that reflects changes in the underlying
costs of efficiently providing SNF services. It is important to note
that the framework does not handle distribution issues such as
geographic wage variations.
Due to some variations in technical methodologies for measuring the
factors of an update framework, and because of some of the data
concerns mentioned earlier, implementing an update framework for SNF
PPS would involve making significant policy decisions on issues similar
to those for the inpatient hospital PPS update framework. We invite
comments on the type of data sources to use, what other factors (if
any) we should consider in an update framework, and any additional
comments concerning the issues discussed in this proposed rule.
V. Consolidated Billing
The consolidated billing requirement established by section 4432(b)
of BBA 1997 places the Medicare billing responsibility with the SNF for
virtually all of the services that the SNF's residents receive, except
for a small number of services that the law specifically identifies as
being excluded from this provision. For services that are subject to
this provision, the original legislation made no distinction as to
whether the services were furnished during the course of a covered Part
A SNF stay.
We have implemented consolidated billing only for services that are
furnished during the course of a covered Part A SNF stay. We have not
implemented consolidated billing for those services furnished to SNF
residents who are not in a covered Part A stay (for example, residents
who have exhausted their available days of coverage under the Part A
SNF benefit, or who do not meet that benefit's post-hospital or level
of care requirements). As explained in the final rule of July 30, 1999
(64 FR 41671), implementing the Part B aspect of the provision would
entail making significant systems modifications, which have been
delayed by systems constraints that arose in connection with achieving
Y2K compliance.
In addition, recently enacted provisions in BIPA 2000 have also
affected this aspect of consolidated billing. For services furnished on
or after January 1, 2001, section 313(a) of BIPA 2000 amends section
1862(a)(18) of the Act by eliminating consolidated billing for most
services furnished to SNF residents during noncovered stays. This
amendment limits the application of consolidated billing to those
services that are furnished during the course of a covered Part A stay,
with one exception: for SNF residents in noncovered stays, the only
services for which the SNF retains the Medicare billing responsibility
are physical, occupational, and speech-language therapy. (The related
requirements for fee schedule payment and appropriate HCFA Common
Procedure Coding System (HCPCS) coding for Part B SNF services have not
been repealed, and remain the law.) We propose to revise the
regulations at Sec. 411.15(p) to reflect this change.
We regard the provision of therapy services as an inherent and
integral function of this type of facility, and we believe that the
statutory requirement for SNFs to retain the Part B billing
responsibility for these particular services reflects a number of
policy considerations. First, these are services for which the SNF
already has the billing responsibility under the separate Part B
therapy cap provision enacted by section 4541 of BBA 1997. In addition,
unlike some types of services (such as ambulance and laboratory) with
which SNFs historically have had only limited billing experience, most
SNFs are familiar with the procedures involved in furnishing and
billing for therapy and other skilled rehabilitation services. In fact,
section 1819(a)(1) of the Act describes such a facility in terms of
being primarily engaged in furnishing skilled nursing or rehabilitation
services to its residents. The SNF level of care definition in section
1814(a)(2)(B) of the Act defines a beneficiary's access to SNF coverage
under Part A as involving the need for and receipt of ``skilled nursing
care * * * or other skilled rehabilitation services * * *''.
Finally, since the inception of the Medicare program, section
1861(h)(3) of the Act has provided for coverage of physical,
occupational, and speech-language therapy services under the Part A
extended care benefit when furnished either directly by the facility,
or by others under arrangements with the facility. Thus, physical,
occupational, and speech-language therapy are unique among SNF services
because the law has always explicitly provided for Part A coverage of
them when furnished under an arrangement with an outside supplier in
which the SNF performs the Medicare billing for the services.
Section 313 of BIPA 2000 also contains a number of technical and
conforming changes to reflect the amendment of section 1862(a)(18) of
the Act, as discussed above. Section 313(b)(1) amends section
1842(b)(6)(E) of the Act (which provides that only the SNF can receive
Part B payments for services furnished to those of its residents in
noncovered stays), by limiting payment to SNFs to only those situations
in which the SNF elects to furnish such Part B services--either
directly with its own resources, or under an arrangement with an
outside supplier in which the SNF assumes the billing responsibility.
We are revising the regulations at Sec. 410.150 to reflect this change.
This section of the legislation also removes the existing language in
section 1842(b)(6)(E) of the Act that refers to services furnished to a
resident of ``* * * a part of a facility that includes a skilled
nursing facility (as determined under regulations)''. As explained in
the May 12, 1998, SNF PPS interim final rule (63 FR 26297), BBA 1997
originally introduced this language in order to apply the consolidated
billing requirement not only to the portion of a nursing home that is
actually certified as a Medicare SNF, but also to any noncertified
remainder:
This avoids creating a perverse incentive for SNFs to set aside
a nonparticipating section in which they could otherwise circumvent
the Consolidated Billing requirement for those residents who are not
in a covered Part A stay.
However, since the consolidated billing requirement has now been
limited to those residents in Part A covered stays, and physical,
occupational, and speech-language therapy in noncovered stays, the
language that extended its applicability to the noncertified portion of
a nursing home is no longer relevant. This is reflected in our proposed
change to the regulation at Sec. 411.15.
Section 313(b)(2) of BIPA 2000 amends section 1842(t) of the Act by
deleting a similar reference to the noncertified portion of a nursing
home. Section 1842(t) of the Act requires that Part B claims for
physician services furnished to SNF residents (which are excluded from
consolidated billing)
[[Page 24021]]
must include the SNF Medicare provider number. Section 313(b)(2) of
BIPA 2000 also expands this requirement to apply to Part B claims for
all types of services furnished to SNF residents. For a SNF resident in
a covered Part A stay, this expanded requirement would apply to claims
for any type of service that is excluded from consolidated billing
(and, thus, is separately billable to Part B by an outside source). For
residents in a noncovered stay, it would encompass claims for all Part
B services that the resident receives. We are proposing to revise the
regulations at Sec. 424.32 to reflect this change.
Section 313(b)(3) of BIPA 2000 amends the existing language in
section 1866(a)(1)(H)(i)(I) of the Act by requiring compliance with
section 1862(a)(18), as amended, under the terms of a SNF's Medicare
provider agreement. We are proposing to revise the regulations at
Sec. 489.20 to reflect this change. Finally, section 313(d) of BIPA
2000 directs the Office of Inspector General to monitor payments for
services furnished to SNF residents during noncovered stays, in order
to help prevent duplicate payment or the excessive provision of
services.
VI. Application of the SNF PPS to SNF Services Furnished by Swing-
Bed Hospitals
A. Current System for Payment of Swing-bed Facility Services Under Part
A of the Medicare Program
Section 1883 of the Act permits certain small, rural hospitals to
enter into a swing-bed agreement, under which the hospital can use its
beds to provide either acute or SNF care, as needed. Currently, Part A
pays for SNF services furnished in Medicare swing-bed hospitals on a
cost-related basis, with both calculated rate and retrospective,
reasonable cost-based components. Under Medicare payment principles set
forth in section 1883(a)(2)(B) of the Act and regulations at
Sec. 413.114, swing-bed facilities receive payment for two major
categories of costs: routine and ancillary.
Routine costs are the costs of those services included by the
provider in a daily service charge. Routine service costs include
regular room, dietary, and nursing services, minor medical supplies,
medical social services, psychiatric social services, and the use of
certain facilities and equipment for which a separate charge is not
made. Ancillary costs are costs for specialized services, such as
therapy, drugs, and laboratory services, that are directly identifiable
to individual patients. Capital-related costs, such as the cost of
land, building, equipment, and the interest incurred in financing the
acquisition of such items, are not reimbursed separately. Instead, they
are incorporated into the routine and ancillary cost components of the
rate.
Under Medicare rules, the reasonable cost of ancillary services is
paid in full. For routine operating costs, swing-bed providers are paid
a predetermined rate equal to the average reasonable routine cost of
all freestanding SNFs in the census region. This pre-determined rate is
based on annual cost report data, is adjusted for inflation, and is
calculated on a calendar year basis. For swing-bed payment purposes,
there are nine regions.
B. Requirement of the Balanced Budget Act of 1997 for Swing-Bed
Facility Services To Be Paid Under the Prospective Payment System for
Skilled Nursing Facilities
Section 1888(e)(7) of the Act and section 203 of BIPA 2000 confers
authority on the Secretary to specify when swing-bed hospitals become
subject to the SNF PPS, subject to the limitation that swing-bed
hospitals cannot be paid under the SNF PPS for cost reporting periods
prior to July 1, 1999, and must be paid under the SNF PPS by the end of
the transition period described in section 1888(e)(2)(E) of the Act.
The SNF PPS transition period ends June 30, 2002, the day immediately
following the last day that any SNF could be eligible for the blended
rate provisions established for the three-year transition period.
We are proposing to revise the regulations at Sec. 413.114 to
provide that swing-bed payments be made under the SNF PPS to swing-bed
hospitals for cost reporting periods beginning on and after October 1,
2001, to ensure that the conversion is made within the statutory time
frames. By selecting October 1, 2001 as the effective date, we can
integrate the swing-bed hospitals into the SNF PPS program using the
same time lines that are statutorily required for the annual SNF PPS
updates.
Under BBA 1997, this conversion to the SNF PPS was intended to
apply to payments to swing-bed facilities in critical access hospitals
(CAHs) as well as to those facilities in rural hospitals. However,
section 203 of BIPA 2000 exempted CAHs with swing-beds from the SNF
PPS. Therefore, only rural hospitals with swing-beds will be subject to
the SNF PPS.
Since the application of the SNF PPS to non-CAH swing-bed providers
will not occur until the final portion of the SNF PPS phase-in period,
those swing-bed providers are not eligible for a blended rate. Upon
their PPS effective dates, all rural hospital swing-bed providers will
be paid at the per diem Federal payment rate in effect for rural
providers when services were delivered.
Section 4407 of BBA 1997 redefined the movement of patients from
hospitals from PPS hospitals to SNFs as transfers rather then
discharges. This provision applies to hospital discharges for 10
specific DRGs (014, 113, 209, 210, 211, 236, 263, 264, 429, and 483),
and mandates that payment for these post-acute transfers cannot exceed
the sum of 50 percent of the regular transfer payment and 50 percent of
the regular DRG payment. This provision applies to all transfers from a
DRG hospital to a SNF that is currently reimbursed under the SNF PPS.
Swing-bed discharges from acute to SNF-level care were specifically
exempted from this provision, and swing-bed hospitals would retain
their exempt status when they become subject to the SNF PPS. However,
in connection with the possible reevaluation of the existing swing-bed
conditions of participation discussed in the following section, and the
potential for changes associated with a change in payment methodology,
we plan to monitor swing-bed activity to determine whether any
additional changes may be necessary. We are also mindful of the unique
relationship between acute care and SNF-level services in a swing-bed
facility. For this reason, we are soliciting comments on this issue,
with particular emphasis on both the need for a swing-bed transfer
provision and the expected impact it would have on swing-bed hospital
operations. For a more detailed explanation of the policy regarding PPS
hospital discharges to post-acute care providers, please see Program
Memorandum A-98-26 (July, 1998).
C. Requirements of BBRA 1999 Affecting Swing-Bed Payment and
Eligibility
Section 408 of BBRA 1999 modified the swing-bed provisions in
section 1883(b) of the Act as follows:
Hospitals with more than 49 and fewer than 100 beds will
no longer be required to discharge beneficiaries from swing-beds within
5 days of a community SNF bed becoming available.
Hospitals will no longer have a cap on the number of days
of swing-bed services they can provide. The requirement that swing-bed
days be no more than 15 percent of the total bed days was removed.
[[Page 24022]]
Hospitals will no longer be required to obtain state
Certificate of Need approval for swing-beds.
By removing the per discharge restrictions on length of stay and
the aggregate caps on the facility's ratio of swing-bed to acute days,
these BBRA 1999 provisions give swing-bed hospitals more flexibility in
determining how to use their swing-beds. Under BBRA 1999, the
implementation date of these amendments is to coincide with the
timeframe for the swing-bed transition to the SNF PPS schedule. We
propose to revise the regulations at Sec. 413.114 to implement this
change.
Since swing-bed services are provided within an acute care facility
and have historically represented short stay services, swing-bed
providers have not been subject to the full set of participation
requirements that apply to SNFs. Instead, they have been subject to the
hospital conditions of participation, plus an abbreviated set of SNF
participation requirements specified in Sec. 482.66. It is not our
intent to change the swing-bed conditions of participation at this
time; however, we are aware that the BBRA 1999 amendments may encourage
swing-bed facilities to make greater use of their facilities to serve
beneficiaries with longer term needs, who otherwise would have been
transferred to a SNF. We plan to monitor swing-bed utilization and
practice patterns to determine whether changes are occurring that
warrant a review of swing-bed conditions of participation. We welcome
comments on the need for and nature of changes, if any, that would be
most helpful in ensuring continued high quality services in swing-bed
facilities.
D. Implications of Swing-Bed Facility Conversion to the SNF PPS
The SNF PPS is an outgrowth of substantial research efforts
beginning in the 1970s. It is based on the recognition that differences
in patient characteristics result in different levels of resource
utilization. Unlike some older payment methodologies that paid a flat
per diem amount, a case-mix system measures the intensity of care and
services required for each patient and then translates that into a
payment level.
Under the SNF PPS, payment rates are based on mean SNF costs in a
base year, updated for inflation. Swing-bed routine cost reimbursement
is similarly based on a precalculated average cost. However, under the
current methodology, swing-beds are paid at a rate consisting of the
average of the freestanding nursing facility costs within the region.
In contrast, under the SNF PPS, costs are calculated using both
freestanding and hospital-based SNF data.
The ability to identify differences in patient service needs is
crucial to the development of a case-mix system. For the SNF PPS, we
needed a sophisticated patient classification system that specifically
captured resource use of individuals receiving SNF-level care. The
Resource Utilization Group, version 3 (RUG-III) is a 44-group patient
classification system that was designed specifically to measure SNF-
level services. RUG-III establishes a hierarchy of major patient types,
organized into seven major categories. Each of these categories is
further differentiated by patient characteristics and service needs to
yield the 44 specific patient groups used for payment. Differences in
service use are shown by assigning a weight or case mix index to each
RUG-III group. This weight represents the amount of nursing and
rehabilitation staff time, weighted by salary level, and is
standardized to reflect the relative value of each group within the 44-
group system.
Detailed descriptions of the RUG-III classification methodology are
included in the May 12, 1998 SNF PPS final rule (63 FR 25252).
Additional information on the RUG-III system is available in the annual
SNF PPS updates (64 FR 41645, July 30, 1999, and 65 FR 46770, July 31,
2000). Like the DRG system used in the inpatient hospital PPS, the RUG-
III system has been automated. Program specifications, record layouts
and RUG-III coding logic may be found on HCFA's web site at
www.hcfa.gov/medicaid/mds2.0/default.htm.
All data needed to classify a Medicare beneficiary into one of the
RUG-III groups is contained in the MDS 2.0. The MDS 2.0 is a resident
assessment instrument used by SNFs for care planning, quality
monitoring, and SNF PPS payment. As described in Section G below, we
plan to use the MDS 2.0 to calculate SNF PPS payments for swing-bed
services.
All providers currently subject to the SNF PPS perform periodic MDS
2.0 assessments for Medicare beneficiaries in Part A stays. Facilities
then generate electronic MDS 2.0 records, and transmit each
beneficiary's assessment to a designated state agency. These electronic
MDS 2.0 records are then transmitted by the state agency to HCFA's data
repository. For more information on MDS encoding and transmission, see
HCFA's final rule mandating the transmission of MDS records (62 FR
67174, December 23, 1997) and the HCFA web site at www.hcfa.gov/medicaid/mds2.0/default.htm.
Under SNF PPS, providers must transmit their MDS 2.0 assessments to
the appropriate state agency and receive confirmation that the MDS 2.0
record has been accepted into the state's MDS 2.0 data base before
submitting a bill to the Part A FI. Billing instructions have been
developed for SNFs subject to the SNF PPS. Three Program Memorandums
were issued shortly after the introduction of the SNF PPS, and provide
a basic understanding of the current billing requirements (Program
Memorandums A-98-16 (May 1998), A-98-20 (June 1998), and A-98-26 (July
1998)). In addition, each Part A FI has developed its own SNF PPS
training materials and billing instructions. HCFA staff will be working
with the FIs to review these billing requirements and to identify any
changes or additions needed to accommodate swing bed providers. We are
soliciting comments on concerns related to billing or claims processing
in swing-bed facilities.
Finally, swing-bed claims are already subject to medical review to
ensure that the services provided to Medicare beneficiaries are
reasonable and necessary, and meet Medicare's SNF level of care
criteria. Under the SNF PPS, these reviews will be modified to verify
the accuracy of the clinical data used to determine the RUG-III group
billed. We will work with the appropriate contractors to finalize
procedures for these swing-bed reviews, and we plan to publish specific
instructions and guidelines later this year.
E. SNF PPS Rate Components
The SNF PPS methodology is discussed in detail in the regulations
at 42 CFR Part 413, subpart J. As this methodology is only now being
applied to swing-bed hospitals, the major components of the PPS Federal
rate are summarized below.
The nursing component includes direct nursing care and the
cost of non-therapy ancillary services required by Medicare
beneficiaries. This portion of the rate is case-mix adjusted using the
RUG-III classification system described in detail in the May 12, 1998
SNF PPS interim final rule (63 FR 26252). Swing-bed facilities will be
reimbursed under the rural facility rates as shown in Table 6.
The therapy component includes physical, occupational, and
speech-language therapy services provided to beneficiaries in a Part A
stay and, like the nursing component, is case-mix adjusted. Payment
varies based on the actual therapy resource minutes
[[Page 24023]]
received by the beneficiary and reported on the MDS assessment
instrument.
The non-case-mix therapy component is a standard amount to
cover the cost of therapy assessments of beneficiaries who were
determined not to need continued therapy services. This payment is
added to the rate for all RUG-III groups except those in the
Rehabilitation category.
The non-case-mix component is also a standard amount added
to the rate for each RUG-III group to cover administrative and capital-
related costs. The specific costs included in this rate component are
described in the May 12, 1998 SNF PPS interim final rule (63 FR 26252).
The RUG-III system utilizes data from the MDS to determine the
appropriate payment level for nursing and therapy services. Upon
transition to PPS, swing-bed providers will be required to complete MDS
assessments according to the same Medicare payment assessment schedule
designated for SNFs: on the 5th, 14th, 30th, 60th, and 90th days of
post-hospital extended care (Part A SNF) services.
In addition, the portion of the Federal rate attributable to wage-
related costs is adjusted by a wage index. For swing-bed facilities, we
will use the wage index applicable to the county in which the facility
is located or, in the absence of a county wage index, the rural rate
for the state in which the facility is located.
F. Implementation of the SNF PPS for Swing-Bed Facilities
Under section 1888(e)(7) of the Act, swing-bed providers (other
than CAHs) would be subject to the SNF PPS by the end of the SNF PPS
transition period described in section 1888(e)(2)(E) of the Act.
However, swing-bed services are not subject to the consolidated billing
requirement for services furnished to SNF residents under section
1862(a)(18) of the Act, but instead are subject to the similar bundling
requirement for services furnished to hospital inpatients under section
1862(a)(14) of the Act (see section VI.J below).
G. Use of the Resident Assessment Instrument--Minimum Data Set (MDS
2.0)
Swing-bed facilities are not currently subject to the clinical MDS
requirements, but will be required under the PPS to perform the
Medicare-required MDS assessments.
The MDS required for payment purposes includes the MDS face sheet,
Sections AA-R, and Section T. In addition, swing-bed providers, like
other nursing facilities, must complete the discharge and reentry
tracking forms as appropriate to track the beneficiary's movement into
and out of the post-acute care facility. Swing-bed facilities that also
participate in the Medicaid program may also be required, at State
option, to complete Section S.
When completing the MDS, swing-bed facility staff should use the
instructions in the Long Term Care RAI User's Manual. A copy of this
manual is available on the HCFA web site at www.hcfa.gov/medicaid/mds20/man-form.htm and is also available for purchase.
The types of assessments used to support SNF PPS billing are
described below.
1. Regularly Scheduled Medicare Assessments
MDS assessments must be performed in accordance with a
predetermined schedule based upon the start of a Medicare Part A
covered stay. The assessments are due on days 5, 14, 30, 60, and 90 of
the SNF Part A covered stay.
2. Readmission/Return Assessments (MDS Item A8b=5)
This MDS reason for assessment is used when a beneficiary who is
receiving Part A SNF care in a swing-bed is hospitalized and then
returns to the swing-bed. The assessment reference date of the
Readmission/Return Assessment must be set within 5 days of the
readmission, as with a regular Medicare 5-day assessment. Like the 5-
day assessment, there are 3 grace days available.
3. Other Medicare-Required Assessments (OMRA)
Other Medicare-Required Assessments (OMRAs) must be performed when
a beneficiary in a covered Part A stay stops receiving therapy, but
continues to receive other skilled services, thus remaining eligible
for Part A services. This assessment must be performed between 8 and 10
days after the cessation of all rehabilitation therapy services. It may
not be used to indicate changes in the amount or frequency of service
or to show reductions in the number of therapy disciplines provided.
For example, an OMRA is not required to show that a beneficiary's
speech-language therapy has been discontinued when the beneficiary is
still receiving physical therapy. This assessment is not required if
the beneficiary's Part A stay is discontinued when the therapy is
stopped.
Since swing-bed facilities do not perform significant change or
significant correction assessments, we have no method of recognizing
changes in the beneficiary's clinical status that occur outside the
regular SNF PPS assessment schedule. For this reason, we are proposing
to modify the MDS 2.0 by adding a new reason for an OMRA assessment
specific to swing-bed facilities. Swing-bed providers would then use
this additional reason for assessment code when preparing off-cycle
assessments reflecting changes in patient status that change the RUG-
III group and payment rate.
H. Required Schedule for Completing the MDS
Swing-bed providers would follow the same MDS completion schedule
for Medicare PPS assessments as other providers reimbursed under the
SNF PPS. When performing an MDS assessment, the registered nurse
coordinating the assessment would first establish the period of time
that would be used to observe and assess the beneficiary. The last day
of the observation period is defined as the Assessment Reference Date
(ARD). The ARD is the date used to determine the timeliness of the
Medicare-required MDS assessments. The assessment schedule is shown in
Table 12.
The Medicare Assessment Window refers to the days on which the MDS
ARD may be set in order for the assessment to be considered timely. For
example, the ARD for the 5-day assessment should be set between days 1
and 5 of the beneficiary's admission to the swing-bed. Since we realize
that there will be exceptional circumstances in which additional time
will be needed, we have provided for grace days. MDS assessments with
ARDs on a grace day would also be considered timely. The timeliness of
the MDS assessments may be monitored to identify providers that
routinely perform assessments during the grace period.
In addition, Medicare PPS assessments are required to be completed
within 14 days of the ARD. An MDS is considered completed on the date
the Assessment Coordinator indicates on the MDS in Section R(2)(b).
Swing-bed providers that fail to perform assessments or that perform
late assessments (ARD outside of the specified assessment window) are
paid at the default rate. This default rate is equal to the rate paid
for the lowest acuity level in the RUG-III system, PA1.
[[Page 24024]]
Table 12.--Assessment Schedule
------------------------------------------------------------------------
Assessment Payment
Type of assessment window days Grace days period days
------------------------------------------------------------------------
5 day............................ 1-5 6-8 14
14 day........................... 11-14 15-19 14
30 day........................... 21-29 30-34 30
60 day........................... 50-59 60-64 30
90 day........................... 80-89 90-94 10
------------------------------------------------------------------------
Each assessment would then be used to calculate a RUG-III group for
payment. As shown in Table 12, the RUG-III group is used to bill
Medicare for Medicare-covered days of SNF care. The days shown in the
payment period column are the maximum number of covered days that can
be billed using the 5, 14, 30, 60, and 90 day assessments. Swing-bed
care, like care in SNFs, is covered by Medicare when the beneficiary
meets the Medicare level of care and medical necessity criteria.
I. RUG-III ``Grouper'' Methodology and Software
RUG-III is a patient classification system that classifies
beneficiaries receiving SNF care based on the amount of nursing and
therapy resources needed to provide that level of care. RUG-III
establishes a seven level hierarchy based on resource use. The seven
levels are rehabilitative services, extensive care, special care,
clinically complex, cognitive impairment, behavior, and reduced
physical function. The classification system is then subdivided into 44
groups using activities of daily living (ADL) deficits, depression, and
the provision of restorative nursing services as classification
criteria. All data necessary to classify a patient into one of the RUG-
III categories is contained on the MDS 2.0.
Swing-bed bills would be paid in the same manner as for all other
providers subject to the SNF PPS. Swing-bed facilities would encode and
transmit their MDS data to the appropriate State agency. The RUG-III
group on the MDS would be validated by the State upon acceptance of the
facility's MDS data file. The provider would bill Medicare using the
validated RUG-III code. Detailed information on the RUG-III system can
be found in the July 30, 1999 SNF PPS final rule published in the
Federal Register (64 FR 41684), and on HCFA's PPS web site at
www.hcfa.gov/medicare/snfpps.htm.
Detailed information on the RUG-III software can be found at
www.hcfa.gov/medicaid/mds20/default.htm. These software groupers are
available from many software vendors, however, we have developed the
standard software grouper product, RAVEN, which is available to all
providers at no cost. We also provide ongoing support for the RAVEN
software, and have a Help Desk to assist providers with data
transmission and other technical problems. The RAVEN software may be
downloaded by accessing HCFA's web site at www.hcfa.gov/medicaid/mds20/raven.htm.
J. Applicability of Consolidated Billing to SNF Services Furnished in
Swing-Bed Facilities
As enacted by section 4432(b) of BBA 1997, the SNF consolidated
billing requirement (which places the Medicare billing responsibility
for almost the entire range of Medicare-covered services with the SNF)
is based on services that are furnished to SNF residents. However, a
swing-bed agreement allows for the provision of SNF services to
inpatients of certain small, rural hospitals. These swing-bed services
are not subject to the SNF consolidated billing requirement at section
1862(a)(18) of the Act, since that provision applies to services that
are furnished to residents of SNFs. Rather, these swing-bed services
are subject to the hospital bundling requirement at section 1862(a)(14)
of the Act, which applies to services that are furnished to inpatients
of hospitals.
The hospital bundling requirement is a longstanding provision that
has applied uniformly to all hospitals (including those with swing-bed
agreements) and does not represent a new requirement or a change in
existing procedures for these facilities. The hospital bundling
provision is conceptually similar to the SNF consolidated billing
requirement (since it places with the hospital the Medicare billing
responsibility for virtually all services that the patient receives),
and actually served as the model for the SNF consolidated billing
legislation. Like SNF consolidated billing, hospital bundling
specifically excludes the services of several types of practitioners
(services furnished by physicians, physician assistants, nurse
practitioners, clinical nurse specialists, certified nurse-midwives,
clinical psychologists, and certified registered nurse anesthetists).
However, unlike SNF consolidated billing, the hospital bundling
provision does not provide for the additional exclusion of certain
other types of services, such as dialysis or erythropoietin (EPO).
When the SNF PPS was implemented in July 1998, we received several
questions concerning the relationship between SNF consolidated billing
and Medicare's preadmission payment window provision, which requires
that certain services furnished during the period immediately preceding
an inpatient hospital admission be included in the payment for the
hospital admission. The most common question is related to situations
in which a SNF resident in a covered Part A SNF stay receives
outpatient services from a hospital, and is subsequently admitted to
that same hospital as an inpatient within three days. Both hospital and
SNF providers were unsure whether the hospital outpatient services
should be included on the hospital inpatient bill or were included in
the SNF PPS payment. Since this issue is relevant to swing-bed patients
who may require a readmission to an acute care hospital (either within
the same facility or to another hospital), we are reiterating our
previous clarification on this point.
Section 1886(a)(4) of the Act includes a preadmission payment
window provision for hospitals. Under this provision, certain Part B
services furnished by a hospital (or by an entity wholly owned or
operated by the hospital) within three days before an inpatient
admission to that hospital are included in the Medicare Part A payment
for the hospital admission. However, we clarified the application of
the payment window provisions in a final regulation published in the
Federal Register on February 11, 1998 (63 FR 6865-66), to explain that
this provision does not apply to Part A services furnished during the
preadmission period by home health agencies, SNFs, and hospices. The
preadmission payment window applies
[[Page 24025]]
only to services that are ``otherwise payable under Medicare Part B.''
Therefore, those preadmission services that are covered under the Part
A SNF benefit would not be within the scope of the preadmission payment
window provision.
However, services furnished on the day that a SNF resident is
admitted to a hospital as an inpatient are not included in the SNF PPS
payment rate. Thus, the outpatient hospital services furnished on that
day would be subject to the preadmission payment window provision. In
addition, services excluded from the SNF PPS under consolidated billing
are considered Part B services and, when provided within three days of
admission as a hospital inpatient, are subject to the preadmission
payment window. Among these SNF PPS-excluded services are certain
exceptionally intensive services furnished in the hospital setting:
cardiac catheterization, computerized axial tomography (CT) scans,
magnetic resonance imaging (MRIs), ambulatory surgery involving the use
of an operating room, emergency services, radiation therapy,
angiography, and certain lymphatic and venous procedures.
For a complete list of services that are reimbursed separately from
the SNF PPS rate, please refer to Program Memorandums A-98-37 (November
1998, reissued as A-00-01, January 2000) and AB-00-18 (March 2000).
K. Costs Associated With Automating the MDS: Preliminary Estimates
In accordance with section 1888(e)(7) of the Act, we propose to
apply the SNF PPS to swing-bed providers (other than CAHs) effective
with cost reporting periods beginning on or after October 1, 2001,
consistent with the statutory mandate to implement this provision by
the end of the SNF PPS transition period described in section
1888(e)(2)(E) of the Act. Reimbursement under the SNF PPS is contingent
upon the periodic completion of an MDS assessment, which is used to
assign each beneficiary to an acuity level. Payment is then based on
that acuity level. Therefore, all swing-bed providers must automate the
MDS data collection and transmission process and be capable of
transmitting MDS data no later than the effective date of the
conversion to PPS. We anticipate that swing-bed providers will incur
some incremental costs associated with automating and transmitting the
MDS. Most start up costs associated with automating the MDS will be
related to hardware, software, and staff training. These costs will
vary with the size of each swing-bed facility, the facility's current
level of computer technology, and the familiarity of staff with the MDS
assessment instrument.
At the current time, a number of swing-bed hospitals also operate
distinct part SNFs, and have systems in place to prepare, store, and
transmit MDS assessments. We estimate that approximately 30 percent of
the nation's 1,240 Medicare swing-bed providers presently have the
hardware and software capability for automated MDS data collection and
transmission. Other facilities may be using computers for other
applications and may need to upgrade their systems to provide access to
clinical and/or data entry staff within the swing-bed unit. For swing-
bed hospitals that do not currently operate distinct part SNFs, we
expect that a significant percentage will have either very limited
capacity or no computer system at all.
Based on our experience with SNFs, we have developed this
preliminary estimate of the costs a swing-bed provider can expect to
incur. Costs are separated into two categories, start-up and
maintenance.
Hardware: We estimate total hardware costs associated with
automating the MDS to be approximately $2,000 to $2,500 for a typical
swing-bed provider. This amount includes the cost of a computer,
communications components capable of running MDS software and
transmitting MDS assessments, and a laser printer. This estimate is
based on the most recent cost data available for a system that meets
the specifications required by the State system. As noted earlier in
this proposed rule, we expect that many swing-bed hospitals already
have some computer capability and will not need to buy an entirely new
system. Based on information currently available, we have no way to
quantify the number of providers requiring upgrades to their existing
computer systems in order to operate the MDS software. However, the
cost of upgrading existing systems should be substantially less than
the hardware cost estimates provided here. It is also possible that
some providers may elect more sophisticated and expensive multi-user
systems. However, since these systems are not generally appropriate for
small facilities, are not required for SNF PPS payment purposes, we
have considered this type of multi-user system to be an optional
expense, and did not include it in the cost estimates. For this
analysis, we assumed that all providers would purchase new hardware,
and that assumption may overstate the cost estimates.
This cost estimate is based on a computer system suitable for a
small business, and assumes that the facility will add applications and
data files over time to support ongoing operations. We anticipate that
many swing-bed hospitals will choose to purchase this type of system
even though it will initially provide excess capacity, and believe that
the selection is appropriate. Facilities may, of course, choose a more
basic configuration at lower cost. A comparison between a small
business industry standard configuration and the minimum system capable
of running the necessary MDS software is shown in Table 13.A. Ongoing
hardware maintenance costs for nursing homes are expected to average
about $100 annually. Service contracts are also available for new PC
purchases.
Table 13.A.--PPS Computer Requirements
------------------------------------------------------------------------
Small business Basic MDS
Component standard processing
------------------------------------------------------------------------
Processor....................... Pentium III 933/ Pentium III.
133MH.
Memory.......................... 128MB sdram....... 32 MB.
Keyboard........................ Standard with PC.. Standard with PC.
Monitor......................... 17" color monitor. 14" color monitor.
Hard Drive...................... 20GB.............. 100MB.
Floppy Drive.................... 1.44MB 3.5"....... 1.44MB 3.5".
Operating System................ Win2000........... Windows 98, NT.
Data Backup..................... Iomega 250MB Zip Optional.
drive.
Mouse........................... Standard with PC.. Standard with PC.
Modem........................... v.90 56K voice/ 28.8k voice/data/
data/fax. fax.
Media Options................... 20/48X CD-Rom..... Optional.
Communications software......... Netscape or Netscape or
comparable device. comparable
device.
[[Page 24026]]
Applications Software........... Microsoft Small Optional Anti-
Business Norton virus software,
AntiVirus. recommended.
Printer......................... Laser Printer..... Laser Printer.
------------------------------------------------------------------------
Software: Swing-bed providers desiring only to meet the
MDS data submission requirements may use RAVEN, the MDS software
developed by HCFA, which is available free of charge. RAVEN allows
facilities to perform the basic encoding and formatting functions, and
allows users to store and retrieve MDS documents. We already provide
ongoing support for the RAVEN software, and the RAVEN Help Desk will be
available to swing-bed providers to resolve software or transmission
problems. We expect that RAVEN will meet the needs of many small swing-
bed providers.
Some facilities will choose more sophisticated software programs
that can be used to meet other clinical or operational needs, such as
care planning, order entry, quality assurance, or billing. There are
currently over 100 vendors marketing MDS software products, and the
cost of MDS software packages varies widely. Depending on the number of
work stations, the level of customer support, and the scope of
reporting subsystems, an MDS processing system can cost anywhere from
approximately $500 to $5,000 or more per year. Generally, the higher-
priced software is designed for large SNFs or multi-facility chains and
would be inappropriate for a small swing-bed facility. We would expect
that swing-bed facilities that choose not to use RAVEN could purchase
proprietary MDS software and support services at a cost ranging from
$500 to $1,200 per year. While we have considered the possibility,
absent a survey of swing-bed providers, we have no way to quantify how
many will elect to purchase more elaborate proprietary MDS processing
systems. The extra functionality associated with these systems is not
required for payment under the SNF PPS, and should be considered
optional costs. However, we have included a cost range in these
estimates since we do not want to discourage providers from using MDS
systems for other functions, such as quality assurance.
All swing-bed providers will need a common data communications
software package to transmit MDS assessments to the State. This
communications package must meet our specifications related to
transmission of MDS data, which represent current technology. The cost
of the communications software, the anti-virus software and the most
common small business suite of word processing and spread sheet
computer applications is included in the cost estimate for a small
business standard configuration PC system.
Supplies: Supplies necessary for collection and
transmission of data including diskettes, computer paper, and toner,
will vary according to the size of the facility in terms of residents
served and assessments required. For the average facility, supply costs
should average approximately $200 per year.
Maintenance: There are costs associated with normal
maintenance of computer equipment, such as the replacement of disk
drives or memory chips. Typically, such maintenance is provided via
extended warranty agreements with the original equipment manufacturer,
system reseller, or a general computer support firm. These maintenance
costs are estimated to average no more than $100 per year.
L. Provider Training
We recognize our responsibility to provide initial training, as
well as ongoing technical support. We are currently evaluating training
options and solicit comments on training methods, vehicles, and
timeframes.
VII. Provisions of the Proposed Rule
The provisions of this proposed rule are as follows:
In Sec. 410.150, we propose to revise paragraph (b)(14) to
reflect that Part B makes payment to the SNF for its resident's
services only in those situations where the SNF itself furnishes the
services, either directly or under an arrangement with an outside
source.
In Sec. 411.15, we propose to revise paragraph (p)(1) to
indicate that except for physical, occupational, and speech-language
therapy, consolidated billing applies only to those services that a SNF
resident receives during the course of a covered Part A stay. We would
also make conforming revisions in Secs. 489.20(s) and 489.21(h), in the
context of the requirements of the SNF provider agreement. We propose
to revise paragraph (p)(2) to indicate that, for Part B services
furnished to a SNF resident, the requirement to enter the SNF's
Medicare provider number on the Part B claim (which previously applied
only to claims for physician services) would apply to all types of Part
B claims. We would also make conforming revisions in the requirements
regarding claims for payment, at Secs. 424.32(a)(2) and (a)(5). We
would revise the wording of the existing requirement in
Sec. 424.32(a)(5) for a SNF to include appropriate HCPCS coding and its
Medicare provider number on the claims that it files for its residents'
services, by adding that these requirements also apply to these claims
when they are filed by an outside entity. In addition, we would revise
Sec. 411.15(p)(3) to exclude from the definition of a SNF resident, for
consolidated billing purposes, those individuals who reside in the
noncertified portion of an institution that also contains a
participating distinct part SNF.
In accordance with section 1888(e)(2)(E) of the Act, we
propose to revise Sec. 413.114 to reimburse swing-bed services of rural
hospitals (other than CAHs, which would be paid on a reasonable cost
basis) under the SNF PPS described in regulations at subpart J of that
part. This conversion to the SNF PPS would be effective for services
furnished during cost reporting periods beginning on or after October
1, 2001. We also propose to revise paragraph (d)(1) of this section to
reflect the BBRA 1999 modifications to the special requirements for
swing-bed facilities with more than 49 but fewer than 100 beds (as
discussed in section VI.C of this preamble), and to make a conforming
revision in Sec. 424.20(a)(2).
VIII. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), agencies are
required to provide a 60-day notice in the Federal Register and solicit
public comment when a collection of information requirement is
submitted to the Office of Management and Budget (OMB) for review and
approval. To fairly evaluate whether an information collection should
be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comments on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of the agency;
[[Page 24027]]
The accuracy of the agency's estimate of the information
collection burden;
The quality, utility, and clarity of the information to be
collected; and
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Therefore, we are soliciting public comment on each of these issues
for the information collection requirements discussed below.
Sec. 413.114(a)(2)--Implementing the requirement in section
1888(e)(7) of the Act for the SNF PPS to encompass swing-bed services
furnished in rural hospitals will require these providers to complete
MDS assessments, in accordance with the schedule prescribed in
regulations at 42 CFR 413.343(b). Accordingly, we are including in this
proposed rule the following discussion of the anticipated burden for
rural hospitals as a result of implementing this requirement.
On December 23, 1997, we issued in the Federal Register a final
regulation requiring Medicare-certified SNFs and Medicaid-certified
nursing facilities (NFs) to encode and transmit MDS data to HCFA in
electronic format (42 FR 67174). In that rule, we provided cost
estimates for training staff and conducting ongoing functions related
to the preparation, data entry and transmission of MDS data. The
estimates presented here are based on the analysis presented in the MDS
automation rule, but are updated to reflect current wage data and
unique aspects of swing-bed providers. We also used 1999 claims data to
calculate the number of swing-bed stays and the average length of stay.
These data were used to estimate ongoing MDS-related costs.
Using the best available 1999 claims data, we identified 97,576
swing bed stays. There are currently 1,250 swing-bed facilities. The
average annual number of admissions is 78 per swing-bed hospital. Using
the same 1999 claims data, the average length of stay is 8.79 days.
Accordingly, on average, a typical swing-bed facility would need to
complete only one MDS per admission, since the PPS 5-day assessment
governs payment for the first 14 days of the stay.
Data Entry: Based upon our experience with SNFs, we
estimate that swing-bed facilities will need to train at least one
staff person to handle the data entry and MDS processing system. State
agencies currently train SNF staff on these functions, and the training
is generally completed in a single half-day session. Additional
training materials and updates to program requirements are generally
posted on the MDS web sites, and are available to staff at no cost. By
distributing information electronically, and providing Help Desks for
software and transmission problems, we minimize the need for staff
travel, and reduce the ongoing costs associated with encoding and
transmitting MDS data.
Facilities may choose among a variety of approaches to encode the
MDS data in electronic format. In many SNFs, the nurses conducting the
assessments input their responses directly into the computer, and the
data entry time is incorporated into the MDS preparation time. In
others, a data entry operator is used to input the MDS data and
maintain the MDS processing system. For SNFs, the data entry function
averages 15 minutes per assessment. We also expect that staff will
require approximately 2 hours per month to perform system-related
functions such as processing corrections, retrieving assessment
information, printing copies, verifying the accuracy of the data
entered into the system, and reviewing program updates and training
materials.
The hourly rate for data entry was estimated at $15, and reflects
the salary differentials between the two types of staff typically
performing this function: RNs and data operators.
Electronic Transmission: Swing-bed staff will also need
training on data transmission procedures. Again, state agencies have
already developed training programs in this area, and this training
will be available to swing-bed personnel. Generally, a facility would
send one person to a half-day training program. This individual would
be responsible for handling data transmission functions, and would be
expected to train other facility staff on a time-available basis. We
will make the MDS transmission system available to swing-bed providers
prior to the effective date of the transition to the SNF PPS, and allow
staff to practice transmission procedures. We would expect that each
swing-bed provider would have successfully transmitted at least one MDS
data file prior to the updated SNF PPS effective date. Once the
designated individual has been trained, we estimate that the MDS
transmission will take approximately one hour per month.
The hourly rate of data transmission was estimated at $15, and
reflects the salary differentials between the two types of staff
typically performing this function: RNs and data operators.
MDS Coding: Training time will vary depending on the
familiarity of swing-bed staff with MDS coding procedures and the
presence of a hospital-based SNF that is already subject to the SNF PPS
requirements. Many swing-bed hospital employees may have prior
experience in a SNF where they were trained in MDS coding procedures.
In addition, in 1999, approximately 25 percent of swing-bed hospitals
also had hospital-based SNF facilities, and have a pool of trained
staff who can assist swing-bed employees with MDS coding procedures.
Regardless of the amount of inhouse support available, we believe it is
advisable for each swing-bed hospital to designate an RN to assume lead
responsibility, and to ensure that this RN is fully trained. We
estimate that the initial training in MDS clinical coding and SNF PPS
assessment scheduling will require two days.
Based upon the experience SNFs have had in completing the MDS, we
estimate that it generally takes 45 minutes to complete a comprehensive
assessment. We considered reducing this estimate for swing-bed
providers for two reasons. First, the requirements for comprehensive
assessments which are mandated under the Omnibus Budget Reconciliation
Act of 1987, Pub.L. 100-203 (OBRA 1987) are somewhat higher than those
applicable to the SNF PPS assessments. Second, SNF staff generally have
limited knowledge concerning the care the patient received prior to the
SNF admission, and limited access to the records from the prior
hospital stay. As a result, the RN in the SNF conducting a 5-day PPS
assessment has to build a completely new knowledge base about the
patient's condition and care needs. By contrast, in a swing-bed
hospital, the staff caring for the patient have the advantages of
observing the patient during the acute portion of the stay, and should
have more information already available when completing the SNF PPS 5-
day assessment. However, rather than reducing the time estimate, we are
using the higher number to reflect the expected learning curve over the
first year as staff become more familiar with and proficient in
completing the MDS.
As stated above, swing-bed providers averaged 78 stays per year
with an average swing-bed length of stay of slightly under 9 days.
Therefore, swing-bed providers would generally complete just one SNF
PPS assessment for most patients; i.e., the 5-day assessment that
governs payment for the first 14 days of a stay.
Although our projections are based on the most recent available
data, and indicate that swing-bed providers will generally complete
only one MDS per beneficiary during the course of a swing-bed stay, we
are aware that this
[[Page 24028]]
utilization pattern could change. We note that the restrictions on
beneficiary length of stay and the caps on the percentage of bed days
that could be used for swing-bed service were eliminated by section 408
of BBRA 1999, effective with cost reporting periods beginning on and
after October 1, 2002. With this added flexibility, swing-bed providers
may decide to adjust their admission practices, and may serve more
patients requiring longer lengths of stay. If this change occurs,
swing-bed staff may be required to perform additional MDS assessments.
Therefore, we plan to monitor swing-bed utilization patterns to
identify any changes in provider practices and evaluate the impact of
these changes on swing-bed performance under the SNF PPS. However, for
the current analysis, we have used the best available historical data
to project future experience.
To calculate the costs of preparing the MDS, we used 1998 Bureau of
Labor Statistics nursing wage data including fringe benefits, updated
to FY 2002 levels using the SNF market basket factor. The average
hourly rate of $24.70 is used in the calculations shown in Table 13.B.
The Aggregate Cost-Basic Option column estimates are based on October,
2000 data showing 1,250 certified swing-bed providers. The aggregate
calculations assume that all providers chose either the basic or small
business option. Absent a survey of all providers, we have no way to
quantify the number of providers requiring upgrades to existing
computer systems in order to operate the MDS software. We have assumed
purchase of a new system for all providers, which may result in an
overstatement of actual anticipated costs. The Basic Option-Cost/
Facility Hardware estimate includes a laser printer, operating
software, basic applications software, including Word 2000 and Excel
2000, and a one year service agreement and anti-virus software. The
Small Business Option-Cost/Facility Hardware estimate includes a laser
printer, operating software, Microsoft Office Suite applications
software, anti-virus software, and a one year service agreement. The
Communications Software estimate reflects the cost of Netscape or other
communications software. It is assumed that swing-bed providers will
use the free RAVEN software for MDS processing. This software was
developed and tested by HCFA, and has been widely used by both
hospital-based and freestanding SNFs during the past three years. We
cannot quantify the number of providers who will choose to purchase
proprietary systems, and therefore have included a cost range. We
believe that the free RAVEN software, along with the associated Help
Desk Services will meet the needs of most providers. The use of
proprietary systems should be considered an optional cost.
Table 13.B.--Swing-Bed Rural Hospital Cost of Completing MDS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Basic option- cost/ Small business option-- Aggregate cost-- basic Aggregate cost-- small
Category facility cost/facility option business option
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hardware.................................... $1,400.00 $2,100.00 $1,750,000.00 $2,625,000.00
Comm. Software.............................. 100.00 100.00 125,000.00 125,000.00
MDS Software................................ 0-1,200.00 0-1,200.00 0-1,500,000.00 0-1,500,000.00
Staff Training--MDS Coding.................. 494.00 494.00 617,500.00 617,500.00
Staff Training--Entry and Transmission...... 240.00 240.00 300,000.00 300,000.00
Start Up Costs.............................. 2,234.00 2,934.00 2,792,500.00 3,667,500.00
MDS Preparation............................. 1,445.00 1,445.00 216,750.00 216,750.00
MDS Entry................................... 292.50 292.50 365,625.00 365,625.00
MDS Transmission............................ 180.00 180.00 225,000.00 225,000.00
Supplies.................................... 200.00 200.00 250,000.00 250,000.00
Maintenance................................. 100.00 100.00 125,000.00 125,000.00
Operating Cost.............................. 2,217.50 2,217.50 1,182,375.00 1,182,375.00
Estimated First Year Costs.................. 4,451.50-5,651.50 5,151.50-6,351.50 3,974,875.00-5,474,875.00 4,849,875.00-6,349,875.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 424.32(a)(5)--We propose to revise section 424.32(a)(5) to
reflect the new statutory requirement that all Part B claims for
services furnished to SNF residents must include the SNF's Medicare
provider number. Because the burden associated with this additional
requirement is incidental to the completion of a claim, we are unable
to estimate the burden associated with this new requirement, and
explicitly solicit comment. As a result of this new requirement, we
will be revising the OMB clearance package for the HCFA-1500 (Common
Claim Form), OMB number 0938-0008, which is currently being reviewed by
OMB for re-approval.
We have submitted a copy of this proposed rule to OMB for its
review of the information collection requirements in
Secs. 413.411(a)(2) and 424.32(a)(5). These requirements are not
effective until they have been approved by OMB.
If you have any comments on any of these information collection and
record keeping requirements, please mail one original and three copies
within 60 days of the publication date directly to the following:
Health Care Financing Administration, Office of Information Services,
Information Technology Investment Management Group, Division of HCFA
Enterprise Standards, Room N2-14-26, 7500 Security Boulevard,
Baltimore, MD 21244-1850, Attn: John Burke, HCFA-1163-P.
And: Office of Information and Regulatory Affairs, Room 10235, New
Executive Office Building, Washington, DC 20503, Attn: Allison Herron
Eydt, HCFA Desk Officer.
IX. Regulatory Impact Analysis
We have examined the impact of this rule as required by Executive
Order (EO) 12866, the Unfunded Mandate Reform Act (UMRA, Public Law
104-4), the Regulatory Flexibility Act (RFA, Public Law 96-354), and
the Federalism Executive Order (EO) 13132.
Executive Order 12866 directs agencies to assess costs and benefits
of available regulatory alternatives and, when regulation is necessary,
to select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety effects,
distributive impacts, and equity). A regulatory impact analysis (RIA)
must be prepared for major rules with economically significant effects
($100 million or more annually). This proposed rule is a major
[[Page 24029]]
rule as defined in Title 5, United States Code, section 804(2), because
we estimate its impact will be to increase the payments to SNFs by
approximately $300 million in FY 2002. The update set forth in this
proposed rule applies to payments in FY 2002. Accordingly, the analysis
that follows describes the impact of this one year only. In accordance
with the requirements of the Act, we will publish a notice for each
subsequent FY that will provide for an update to the payment rates and
include an associated impact analysis.
The UMRA also requires (in section 202) that agencies prepare an
assessment of anticipated costs and benefits before developing any rule
that may result in an expenditure in any year by State, local, or
tribal governments, in the aggregate, or by the private sector, of $100
million or more. This rule will have no consequential effect on State,
local, or tribal governments. We believe the private sector cost of
this rule falls below these thresholds as well.
Executive Order 13132 (effective November 2, 1999) establishes
certain requirements that an agency must meet when it promulgates
regulations that impose substantial direct compliance costs on State
and local governments, preempt State law, or otherwise have Federalism
implications. As stated above, this rule will have no consequential
effect on State and local governments.
The RFA requires agencies to analyze options for regulatory relief
of small entities. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and governmental agencies.
Most SNFs and most other providers and suppliers are small entities,
either by virtue of their nonprofit status or by having revenues of $10
million or less annually. For purposes of the RFA, all States and
tribal governments are not considered to be small entities, nor are
intermediaries or carriers. Individuals and States are not included in
the definition of a small entity.
The policies contained in this proposed rule would update the SNF
PPS rates by increasing the payment rates published in the July 31,
2000 notice (65 FR 46770). While we do not believe that this will have
a significant effect upon small entities overall, some individual
providers may experience significant increases in payments, while
others (those that are concluding their final year under the transition
from facility-specific to full Federal rates) may experience
significant decreases, as discussed later in this section.
In addition, section 1102(b) of the Act requires us to prepare an
RIA if a rule may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must conform
to the provisions of section 604 of the RFA. For purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a Metropolitan Statistical Area and has fewer
than 50 beds. We have examined the impact on the 1,250 swing-bed
facilities that would start receiving payment under the SNF PPS
effective with cost reporting periods beginning on or after October 1,
2001, and find that the payments to these facilities will increase
overall. Some swing-bed facilities may receive significant increases in
Medicare related payments, as described later in this section.
Accordingly, the following analysis includes a specific examination of
the projected impact of these provisions on small rural hospitals.
A. Background
Section 1888(e) of the Act establishes the SNF PPS for the payment
of Medicare SNF services for periods beginning on or after July 1,
1998. This section specifies that the base year cost data to be used
for computing the RUG-III payment rates must be from FY 1995 (that is,
October 1, 1994, through September 30, 1995.) In accordance with the
statute, we also incorporated a number of elements into the SNF PPS,
such as case-mix classification methodology, the MDS assessment
schedule, a market basket index, a wage index, and the urban and rural
distinction used in the development or adjustment of the Federal rates.
This proposed rule sets forth updates of the SNF PPS rates
contained in the July 31, 2000 final rule (65 FR 46770). Table 14
presents the projected effects of the policy changes in the SNF PPS
from FY 2001 to FY 2002, as well as statutory changes effective for FY
2001 and FY 2002. In so doing, we estimate the effects of each policy
change by estimating payments while holding all other payment variables
constant. We use the best data available, but we do not attempt to
predict behavioral responses to our policy changes, and we do not make
adjustments for future changes in such variables as days or case-mix.
This analysis incorporates the latest estimates of growth in
service use and payments under the Medicare SNF benefit based on the
latest available Medicare claims data and MDS 2.0 assessment data from
1999. We plan to update this data in the final rule. We note that
certain events may combine to limit the scope or accuracy of our impact
analysis, because such an analysis is future-oriented and, thus, very
susceptible to forecasting errors due to other changes in the
forecasted impact time period. Some examples of such possible events
are newly legislated general Medicare program funding changes by the
Congress, or changes specifically related to SNFs. In addition, changes
to the Medicare program may continue to be made as a result of BBA
1997, BBRA 1999, BIPA 2000 or new statutory provisions. Although these
changes may not be specific to SNF PPS, the nature of the Medicare
program is such that the changes may interact, and the complexity of
the interaction of these changes could make it difficult to predict
accurately the full scope of the impact upon SNFs.
B. Impact of the Proposed Rule
The purpose of this proposed rule is not to initiate significant
policy changes with regard to the SNF PPS; rather, it is to provide an
update to the rates for FY 2002. We believe that the revisions and
clarifications mentioned elsewhere in the preamble (for example, the
update to the wage index used for adjusting the Federal rates) will
have, at most, only a negligible overall effect upon the regulatory
impact estimate specified in the rule. As such, these revisions will
not represent an additional burden to the industry.
The aggregate increase in payments associated with this proposed
rule is estimated to be $300 million. The effect of the 20 percent add-
on from BBRA 1999 is $1.0 billion; however, since this add-on became
effective in FY 2001, it has already been reflected in the impact
analysis for last year's final rule (65 FR 46770) and, thus, does not
represent a new, additional impact for the FY 2002 payment rates. There
are three areas of change that produce this increase for facilities:
1. The effect of facilities being paid the full Federal rate.
2. The implementation of provisions in BIPA 2000, such as the 16.6
percent increase in the nursing component of each RUG and the
elimination of the one percent reduction in the SNF market basket for
FY 2001.
3. The total change in payments from FY 2001 levels to FY 2002
levels. This includes all of the previously noted changes in addition
to the effect of the update to the rates.
As seen in Table 14, some of these areas are expected to result in
increased aggregate payments and others are expected to tend to lower
them. The breakdown of the various categories of data in the table is
as follows:
[[Page 24030]]
The first row of figures in the table describes the estimated
effects of the various policies on all facilities. The next six rows
show the effects on facilities split by hospital-based, freestanding,
urban and rural categories. The remainder of the table shows the
effects on urban versus rural status by census region.
The second column in the table shows the number of facilities in
the impact database. The third column shows the effect of the
expiration of the transition and movement to the full Federal rates for
all SNFs. This change has an overall effect of lowering payments by an
estimated 8.5 percent, affecting hospital-based facilities more than
freestanding facilities. The main reason for such a large decrease is
the BBRA 1999 provision that allowed facilities to choose the full
Federal rate. When given the option to do so, an estimated 43 percent
of the facilities elected to go to the full Federal rate. This meant
that the only facilities left to transition to the full Federal rate
are ones for which the expiration of the transition will cause a
decrease in reimbursement. In contrast, those facilities receiving the
full Federal rate will experience an 11.6 percent increase in payments.
The overall effect, therefore, reduced reimbursement, but the effects
across regions are quite variable.
The fourth column shows the projected effect of the 16.66 percent
add-on to the nursing portion of the Federal rate mandated by BIPA
2000. As expected, this results in an increase in payments for all
facilities; however, as seen in the table, the varying effect of the
SNF PPS transition results in a distributional impact. In addition,
since this increase only applies to the nursing portion of the payment
rate, the effect on total expenditures is less than 16.66 percent.
The fifth column of the table shows the effect of the change in the
add-on for the rehabilitation RUGs. The total impact of this change is
zero percent; however, there are distributional effects of this change,
as seen in the table.
The sixth column of the table shows the effect of all of the
changes on the FY 2002 payments. This includes all of the previous
changes, including the update to this year's payment rates by the
market basket. Rebasing of the market basket index from 1992 to 1997
had little impact on the overall changes displayed in this column. It
is projected that payments will increase by 2.1 percent in total,
assuming facilities do not change their care delivery and billing
practices in response. As can be seen from this table, the combined
effects of all the changes vary widely by specific types of providers
and by location. For example, freestanding facilities experience
payment increases, while the effects of the transition cause decreases
in payments for hospital-based providers.
Table 14.--Projected Impact of FY 2002 Update to the SNF PPS
----------------------------------------------------------------------------------------------------------------
Transition Add-on to
Number of to federal nursing Add-on to Total FY
facilities rates rates rehab RUGs 2002 change
(percent) (percent) (percent) (percent)
----------------------------------------------------------------------------------------------------------------
Total.......................................... 9037 -8.5 7.9 0.0 2.1
Urban.......................................... 6300 -9.0 8.0 0.1 1.7
Rural.......................................... 2737 -6.7 7.5 -0.5 3.2
Hospital based urban........................... 683 -14.7 8.5 -0.8 -5.1
Freestanding urban............................. 5617 -8.1 7.9 0.3 2.8
Hospital based rural........................... 533 -9.7 8.2 -2.0 -1.0
Freestanding rural............................. 2204 -6.2 7.4 -0.3 3.9
Urban by region................................
New England.................................... 630 -3.9 8.1 0.2 7.6
Middle Atlantic................................ 877 -2.9 8.4 -1.7 7.0
South Atlantic................................. 959 -10.5 7.7 0.8 0.5
East North Central............................. 1232 -7.6 7.8 0.9 3.9
East South Central............................. 212 -8.8 7.8 0.4 2.1
West North Central............................. 469 -10.6 7.9 0.1 -0.2
West South Central............................. 519 -19.5 8.1 0.1 -9.9
Mountain....................................... 303 -17.3 7.5 1.5 -6.7
Pacific........................................ 1070 -13.9 8.0 0.5 -3.4
Rural by region................................
New England.................................... 88 -0.9 7.5 -0.4 9.7
Middle Atlantic................................ 144 -4.4 7.7 -1.5 4.9
South Atlantic................................. 373 -5.3 7.5 0.1 5.4
East North Central............................. 561 -5.1 7.4 0.0 5.4
East South Central............................. 255 -5.1 7.9 -2.6 3.1
West North Central............................. 581 -8.2 7.7 -1.4 0.8
West South Central............................. 354 -14.9 7.5 0.2 -5.2
Mountain....................................... 204 -11.6 7.2 -0.1 -2.1
Pacific........................................ 151 -7.4 7.2 0.6 3.3
----------------------------------------------------------------------------------------------------------------
In accordance with section 1888(e)(7) of the Act, we propose to pay
rural hospitals for SNF-level swing-bed services under the SNF PPS
effective with cost report periods beginning on and after October 1,
2001. In making this proposal, we have examined the anticipated impact
of this payment change on swing-bed facilities.
We analyzed data from swing-bed claims for calendar years 1996
through 1998 to determine Medicare payments made under the current
swing-bed payment system. The claims data reflect the predetermined
routine cost payments and the interim payment for ancillary services.
While the interim payment rate for ancillary services is subject to
final cost settlement, it represents a reasonable proxy for actual
swing-bed payments.
We then adjusted the historical data on swing-bed payments to 2002
levels. For calendar years 1999 through 2001, we projected the average
payment per day, using the 6.5 percent growth rate calculated from the
most recent
[[Page 24031]]
available data from calendar years 1997 and 1998. For 2002, we used a
blended growth rate that reflects a projected increase in payment for
routine services equal to the market basket of 2.4 percent, but retains
the historical growth factor of 6.5 percent for ancillary payments. In
1998, the average payment per day was $205.41. The estimated swing-bed
payment per day for 2002 under the existing method of reimbursement is
$258.41.
We then estimated the amount that would have been paid for the same
services under the SNF PPS. This estimate reflected both adjustments
for geographic variation and case-mix. For the geographic adjustment,
we used the average rural wage index for FY 2001 (that is, 0.8700). For
case-mix, although Medicare swing-bed claims do not include all of the
data elements necessary to classify patients in exactly the same way as
the patients would be classified in the RUG-III system, there is enough
information to assign Medicare swing-bed patients to RUG-III categories
at a general level. To generate this classification, we used the MEDPAR
case-mix analog described in detail in the SNF PPS interim final rule
published on May 12, 1998 (63 FR 26252). As a result, we were able to
estimate how the national swing-bed population would classify into RUG-
III categories. We found that 69 percent of the covered days would be
assigned to just two RUG-III categories (or six groups): medium
rehabilitation and extensive services.
We also noted that 9 percent of the covered days were assigned to
categories that are not typically associated with a Medicare level of
care (impaired cognition and lower groups). We have not assumed that
these claims were paid in error. Rather, we are assuming that these
patients had skilled care needs other than ones that could be captured
using the MEDPAR case-mix analog, and we have included these stays in
our analysis.
Table 15.--RUG-III Frequency Distribution Using Calendar Year 1999
Claims
------------------------------------------------------------------------
Number of Percent of
RUG-III category level days paid total days
------------------------------------------------------------------------
Ultra High Rehab.............................. 30,618 3
Very High Rehab............................... 33,687 4
High Rehab.................................... 76,596 9
Medium Rehab.................................. 264,614 30
Low Rehab..................................... 58,016 7
Extensive Services............................ 288,131 33
Special Care.................................. 11,540 1
Clinically Complex............................ 35,304 4
Impaired Cognition............................ 4,737 1
Other......................................... 72,293 8
-------------------------
Totals.................................... 875,536 100
------------------------------------------------------------------------
Our next step was to project the SNF PPS payments for these swing-
bed services. For the purposes of this analysis, we used the calendar
year frequency distribution and number of covered swing-bed days shown
in Table 15. Unique nursing case-mix weights have already been
developed for each level of the MEDPAR case-mix analog. These weights
were used to adjust the proposed FY 2002 rural SNF PPS rates set forth
in this proposed rule to determine the SNF PPS rates used in this
estimate. We adjusted these rates for all BBRA and BIPA add-ons
applicable for FY 2002.
Based on our analysis, the FY 2002 SNF PPS payment amount exceeds
the projected payments under the current swing-bed payment system for
that year in 5 of the 10 case-mix analog categories that included 79
percent of the swing bed days. In fact, for the two most common RUG-III
categories, medium rehabilitation and extensive services, the projected
increases are substantial: 14 percent for medium rehabilitation and 16
percent for extensive services. In addition, records in two of the
categories where the projected SNF PPS rate is lower than the projected
swing-bed payment amount under the present system (impaired cognition
and other) group into much higher categories when using the full RUG-
III algorithm.
In terms of aggregate Medicare expenditures, we estimate that the
transition to SNF PPS will increase payments for SNF-level swing-bed
services by 9 percent, or approximately $20 million, while the
aggregate costs will be approximately $20 million in benefits and 6.32
million for completion of the MDS assessments.
Based on these estimates, we believe the financial impact on swing-
bed providers will be positive, with the anticipated 9 percent payment
increase serving to offset the estimated start-up costs associated with
MDS completion and transmission (described in section VI.K of this
proposed rule).
Finally, in accordance with the provisions of Executive Order
12866, this notice was reviewed by the Office of Management and Budget.
X. Federalism
We have reviewed this proposed rule under the threshold criteria of
Executive Order 13132, Federalism, and we have determined that it does
not significantly affect the rights, roles, and responsibilities of
States.
List of Subjects
42 CFR Part 410
Health facilities, Health professions, Kidney diseases,
Laboratories, Medicare, Rural areas, X-rays.
42 CFR Part 411
Kidney diseases, Medicare, Reporting and recordkeeping
requirements.
42 CFR Part 413
Health Facilities, Kidney diseases, Medicare, Puerto Rico,
Reporting and recordkeeping requirements.
42 CFR Part 424
Emergency medical services, Health facilities, Health professions,
Medicare.
42 CFR Part 482
Grant programs-health, Hospitals, Medicaid, Medicare, Reporting and
recordkeeping requirements.
42 CFR Part 489
Health facilities, Medicare, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 42 CFR chapter IV is
proposed to be amended as follows:
PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS
1. The authority citation for part 410 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
* * * * *
Subpart I--Payment of SMI Benefits
2. In Sec. 410.150, the introductory text of paragraph (b) is
republished, and paragraph (b)(14) is revised to read as follows:
Sec. 410.150 To whom payment is made.
* * * * *
(b) Specific rules. Subject to the conditions set forth in
paragraph (a) of this section, Medicare Part B pays as follows:
* * * * *
(14) To an SNF for services (other than those described in
Sec. 411.15(p)(2) of this chapter) that it furnishes to a
[[Page 24032]]
resident (as defined in Sec. 411.15(p)(3) of this chapter) of the SNF
who is not in a covered Part A stay.
* * * * *
PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE
PAYMENT
3. The authority citation for part 411 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart A--General Exclusions and Exclusion of Particular Services
4. In Sec. 411.15, paragraph (p)(1) is revised, and paragraph
(p)(2) introductory text, paragraph (p)(2)(i), and paragraph (p)(3)
introductory text are revised to read as follows:
Sec. 411.15 Particular services excluded from coverage.
* * * * *
(p) Services furnished to SNF residents. (1) Basic rule. Except as
provided in paragraph (p)(2) of this section, any service furnished to
a resident of an SNF during a covered Part A stay by an entity other
than the SNF, unless the SNF has an arrangement (as defined in
Sec. 409.3 of this chapter) with that entity to furnish that particular
service to the SNF's residents. Services subject to exclusion under
this paragraph include, but are not limited to--
(i) Any physical, occupational, or speech-language therapy
services, regardless of whether the services are furnished by (or under
the supervision of) a physician or other health care professional, and
regardless of whether the resident who receives the services is in a
covered Part A stay; and
(ii) Services furnished as an incident to the professional services
of a physician or other health care professional specified in paragraph
(p)(2) of this section.
(2) Exceptions. The following services are not excluded from
coverage, provided that the claim for payment includes the SNF's
Medicare provider number in accordance with Sec. 424.32(a)(5) of this
chapter:
(i) Physicians' services that meet the criteria of Sec. 415.102(a)
of this chapter for payment on a fee schedule basis.
* * * * *
(3) SNF resident defined. For purposes of this paragraph, a
beneficiary who is admitted to a Medicare-participating SNF is
considered to be a resident of the SNF. Whenever the beneficiary leaves
the facility, the beneficiary's status as an SNF resident for purposes
of this paragraph (along with the SNF's responsibility to furnish or
make arrangements for the services described in paragraph (p)(1) of
this section) ends when one of the following events occurs--
* * * * *
PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT
RATES FOR SKILLED NURSING FACILITIES
5. The authority citation for part 413 is amended to read as
follows:
Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and
(n), 1871, 1881, 1883, 1886, and 1888 of the Social Security Act (42
U.S.C. 1302, 1395d(d), 1395(f)b, 1395g, 1395l(a), (i), and (n),
1395hh, 1395rr, 1395tt, 1395ww, and 1395yy).
Subpart F--Specific Categories of Costs
6. In Sec. 413.114:
a. Paragraph (a) is revised.
b. In paragraph (c), the heading is revised.
c. Paragraph (d)(1) introductory text is revised.
Sec. 413.114 Payment for posthospital SNF care furnished by a swing-
bed hospital.
(a) Purpose and basis. This section implements section 1883 of the
Act, which provides for payment for posthospital SNF care furnished by
rural hospitals and CAHs having a swing-bed approval.
(1) Services furnished in cost reporting periods beginning prior to
October 1, 2001. Posthospital SNF care furnished in general routine
inpatient beds in rural hospitals and CAHs is paid in accordance with
the special rules in paragraph (c) of this section for determining the
reasonable cost of this care. When furnished by rural and CAH swing-bed
hospitals approved after March 31, 1988 with more than 49 beds (but
fewer than 100), these services must also meet the additional payment
requirements set forth in paragraph (d) of this section.
(2) Services furnished in cost reporting periods beginning on and
after October 1, 2001. Posthospital SNF care furnished in general
routine inpatient beds in rural hospitals (other than CAHs) is paid in
accordance with the provisions of the prospective payment system for
SNFs described in subpart J of this part. Posthospital SNF care
furnished in general routine inpatient beds in CAHs is paid based on
reasonable cost, in accordance with the provisions of subparts A
through G of this part (other than paragraphs (c) and (d) of this
section).
* * * * *
(c) Special rules for determining the reasonable cost of
posthospital SNF care furnished in cost reporting periods beginning
prior to October 1, 2001.
(d) Additional requirements--(1) General rule. For services
furnished in cost reporting periods beginning prior to October 1, 2001,
in order for Medicare payment to be made to a swing-bed hospital with
more than 49 beds (but fewer than 100), the following payment
requirements must be met:
* * * * *
7. In Sec. 413.337, paragraph (e) is added to read as follows:
Sec. 413.337 Methodology for calculating the prospective payment
rates.
* * * * *
(e) Pursuant to section 101 of the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999 (BBRA) and revised by section
314 of the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA), using the best available data, the
Secretary will issue a new regulation with a newly refined case-mix
classification system to better account for medically complex patients.
Upon issuance of the new regulation, the temporary increases in payment
for certain high cost patients will no longer be applicable.
* * * * *
PART 424--CONDITIONS FOR MEDICARE PAYMENT
8. The authority citation for part 424 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
9. In Sec. 424.20(a)(2), the heading is revised to read as follows:
Sec. 424.20 Requirements for posthospital SNF care.
(a) * * *
(2) Special requirement for certifications performed prior to
October 1, 2001: A swing-bed hospital with more than 49 beds (but fewer
than 100) that does not transfer a swing-bed patient to a SNF within 5
days of the availability date. * * *
* * * * *
Subpart C--Claims for Payment
10. In Sec. 424.32, the introductory text of paragraph (a) is
republished, and paragraphs (a)(2) and (a)(5) are revised.
[[Page 24033]]
Sec. 424.32 Basic requirements for all claims.
(a) A claim must meet the following requirements:
* * * * *
(2) A claim for physician services, clinical psychologist services,
or clinical social worker services must include appropriate diagnostic
coding for those services using ICD-9-CM.
* * * * *
(5) All Part B claims for services furnished to SNF residents
(whether filed by the SNF or by another entity) must include the SNF's
Medicare provider number and appropriate HCPCS coding.
* * * * *
PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL
11. The authority citation for part 489 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart B--Essentials of Provider Agreements
12. In Sec. 489.20, the introductory text is republished, and the
introductory text of paragraph (s) is revised.
Sec. 489.20 Basic commitments.
The provider agrees to the following:
* * * * *
(s) In the case of an SNF, either to furnish directly or make
arrangements (as defined in Sec. 409.3 of this chapter) for any
physical, occupational, or speech-language therapy services furnished
to a resident of the SNF under Sec. 411.15(p) of this chapter
(regardless of whether the resident is in a covered Part A stay), and
also either to furnish directly or make arrangements for all other
Medicare-covered services furnished to a resident during a covered Part
A stay, except the following:
* * * * *
13. In Sec. 489.21, the introductory text is republished, and
paragraph (h) is revised to read as follows:
Sec. 489.21 Specific limitations on charges.
Except as specified in subpart C of this part, the provider agrees
not to charge a beneficiary for any of the following:
* * * * *
(h) Items and services (other than those described in
Sec. 489.20(s)(1) through (15)) required to be furnished under
Sec. 489.20(s) to a resident of an SNF (defined in Sec. 411.15(p) of
this chapter), for which Medicare payment would be made if furnished by
the SNF or by other providers or suppliers under arrangements made with
them by the SNF. For this purpose, a charge by another provider or
supplier for such an item or service is treated as a charge by the SNF
for the item or service, and is also prohibited.
Note: This appendix will not appear in the Code of Federal
Regulations.
Appendix--Technical Features of the Proposed 1997 Skilled Nursing
Facility Market Basket Index
As discussed in the preamble of this proposed rule, we propose
to revise and rebase the SNF market basket. This appendix describes
the technical aspects of the 1997-based index that we are proposing
in this rule. We present this description of the market basket in
three steps:
A synopsis of the structural differences between the
1992-and the 1997-based market baskets.
A description of the methodology used to develop the
cost category weights in the proposed 1997-based market basket.
A description of the data sources used to measure price
change for each component of the proposed 1997-based market basket,
making note of the differences, if any, from the price proxies used
in the 1992-based market basket.
I. Synopsis of Structural Changes Adopted in the Proposed Revised and
Rebased 1997 Skilled Nursing Facility Market Basket
We are proposing just one major structural change between the
current 1992-based and the proposed 1997-based SNF market baskets,
which is that more recent SNF cost data would be used in the
proposed revised and rebased SNF market basket.
The proposed 1997-based market basket contains cost shares for
six major cost categories that were derived from an edited set of FY
1997 Medicare Cost Reports for freestanding SNFs that had Medicare
expenses. FY 1997 cost reports have cost reporting periods beginning
after September 30, 1996 and before October 1, 1997. The 1992-based
market basket used data from the PPS-9 Medicare Cost Reports for
freestanding SNFs with Medicare expenses greater than 1 percent of
total expenses. PPS-9 cost reports have cost reporting periods
beginning after September 30, 1991 and before October 1, 1992. Cost
allocations for the proposed 1997-based SNF market basket within the
six major cost categories use Medicare Cost Reports and two
Department of Commerce data sources: the 1997 Business Expenditures
Survey, Bureau of the Census, Economics and Statistics
Administration, and the 1997 Bureau of Economic Analysis' Annual
Input-Output tables.
II. Methodology for Developing the Cost Category Weights
Cost category weights for the proposed 1997-based market basket
were developed in two stages. First, base weights for six main
categories (wages and salaries, employee benefits, contract labor,
pharmaceuticals, capital-related expenses, and a residual ``all
other'') were derived from the SNF Medicare Cost Reports described
above. The residual ``all other'' cost category was divided into
subcategories, using U.S. Department of Commerce data sources for
the nursing home industry. Relationships from the 1997 Business
Expenditures Survey and data from the 1997 Annual Input-Output
tables were used to allocate the all other cost category.
Below we describe the source of the main category weights and
their subcategories in the proposed 1997-based market basket.
Wages and Salaries: The wages and salaries cost
category is derived using 1997 SNF Medicare Cost Reports. The share
was determined using wages and salaries from Worksheet S-3, part II
and total expenses from Worksheet B. This share represents the wage
and salary share of costs for employees of the nursing home, and
does not include the wages and salaries from contract labor, which
is allocated to wages and salaries at a later step.
Employee Benefits: The weight for employee benefits was
determined using 1997 Medicare Cost Reports. The share was derived
using wage-related costs from Worksheet S-3, part II.
Contract Labor: The weight for the contract labor cost
category was derived using 1997 Medicare Cost Reports. For the
proposed 1997-based SNF market basket, we used an edited group of
cost reports with data filled in for contract labor on Worksheet S-
3, part II. This methodology differed from that of the 1992 SNF
market basket (where we estimated contract labor costs using data
from Worksheet A) since Worksheet S-3, part II, was not available in
the 1992 Cost Reports. This methodology produces results that are
similar to the contract labor share in the 1997 Business
Expenditures Survey. Contract labor was not available in the 1992
Asset and Expenditure Survey. As explained in the preamble, contract
labor costs were distributed between the wages and salaries and
employee benefits cost categories, under the assumption that
contract costs should move at the same rate as direct labor costs
even though unit labor cost levels may be different.
Pharmaceuticals: The pharmaceuticals cost weight was
derived from 1997 SNF Medicare Cost Reports. This share was
calculated using non-salary costs from the pharmacy and drugs
charged to patients' cost centers from Worksheet A.
Capital-Related: The weight for the overall capital-
related expenses cost category was derived using 1997 SNF Medicare
Cost Report data from Worksheet B. The subcategory and vintage
weights within the overall capital-related expenses were derived
using additional data sources. The methodology for deriving these
weights is described below.
In determining the subcategory weights for capital, we used a
combination of information from the 1997 SNF Medicare Cost Reports
and the 1997 Census Business Expenditures Survey. We estimated the
depreciation expense share of capital-related expenses from the SNF
Medicare Cost Reports using data from edited cost reports with data
completed on Worksheet G. For the 1992-based SNF market basket, we
had used depreciation expenses from the 1992 Asset
[[Page 24034]]
and Expenditure Survey. When we calculated the ratio of depreciation
to wages from the 1997 SNF Medicare Cost Reports, the result was
consistent with the ratio from the 1997 Business Expenditures
Survey. The distribution between building and fixed equipment and
movable equipment was determined from the 1997 Business Expenditures
Survey. From these calculations, depreciation expenses (not
including depreciation expenses implicit from leases) were estimated
to be 33.2 percent of total capital-related expenditures in 1997.
The interest expense share of capital-related expenses was also
derived from the same edited 1997 SNF Medicare Cost Reports.
Interest expenses are not identifiable in the 1997 Business
Expenditures Survey. We determined the split of interest expense
between for-profit and not-for-profit facilities based on the
distribution of long-term debt outstanding by type of SNF (for-
profit or not-for-profit) from the 1997 SNF Medicare Cost Reports.
Interest expense (not including interest expenses implicit from
leases) was estimated to be 24.3 percent of total capital-related
expenditures in 1997.
We used the 1997 Business Expenditures Survey to estimate the
proportion of capital-related expenses attributable to leasing
building and fixed and movable equipment. This share was estimated
to be 34.9 percent of capital-related expenses in 1997. The split
between fixed and movable lease expenses was directly available from
the 1997 Business Expenditures Survey. We used this split, and the
distribution of depreciation and interest calculated above to
distribute leases among these cost categories. The remaining
residual is considered to be other capital-related expenses
(insurance, taxes, other). Other capital-related expenses were
estimated to be 7.7 percent of total capital-related expenditures in
1997.
Table A-1 shows the capital-related expense distribution
(including expenses from leases) in the proposed 1997 SNF PPS market
basket and the 1992 SNF market basket.
Table A-1.--Capital-Related Expense Distribution
------------------------------------------------------------------------
Proposed 1997-
1992-based SNF based SNF
capital- capital-
related related
expenses * expenses *
------------------------------------------------------------------------
Total................................... 100.0 100.0
Depreciation............................ 60.5 53.3
Building and Fixed Equipment............ 42.1 36.5
Movable equipment....................... 18.4 16.8
Interest................................ 32.6 39.0
Other capital-related expense........... 6.9 7.7
------------------------------------------------------------------------
* As a percent of Total Capital-Related Expenses.
As explained in section III.B of the preamble, our methodology
for determining the price change of capital-related expenses
accounts for the vintage nature of capital, which is the acquisition
and use of capital over time. In order to capture this vintage
nature, the price proxies must be vintage-weighted. The
determination of these vintage weights occurs in two steps. First,
we must determine the expected useful life of capital and debt
instruments in SNFs. Second, we must identify the proportion of
expenditures within a cost category that are attributable to each
individual year over the useful life of the relevant capital assets,
or the vintage weights.
The derivation of useful life of capital is explained in detail
in the May 12, 1998 interim final rule (63 FR 26252). The useful
lives for the proposed 1997-based SNF market basket are the same as
the 1992-based SNF market basket. The data source that was
previously used to develop the useful lives of capital is no longer
available and a suitable replacement has not been identified. We
welcome comments on any data sources that would provide the
necessary information for determining useful lives of capital and
debt instruments.
Given the expected useful life of capital and debt instruments,
we must determine the proportion of capital expenditures
attributable to each year of the expected useful life by cost
category. These proportions represent the vintage weights. We were
not able to find an historical time series of capital expenditures
by SNFs. Therefore, we approximated the capital expenditure patterns
of SNFs over time using alternative SNF data sources. For building
and fixed equipment, we used the stock of beds in nursing homes from
the HCFA National Health Accounts for 1962 through 1997. We then
used the change in the stock of beds each year to approximate
building and fixed equipment purchases for that year. This procedure
assumes that bed growth reflects the growth in capital-related costs
in SNFs for building and fixed equipment. We believe this assumption
is reasonable since the number of beds reflects the size of the SNF,
and as the SNF adds beds, it also adds fixed capital.
For movable equipment, we used available SNF data to capture the
changes in intensity of SNF services that would cause SNFs to
purchase movable equipment. We estimated the change in intensity as
the trend in the ratio of non-therapy ancillary costs to routine
costs from the 1989 through 1997 SNF Medicare Cost Reports. We
estimated this ratio for 1962 through 1988 using regression
analysis. The time series of the ratio of non-therapy ancillary
costs to routine costs for SNFs measures changes in intensity in SNF
services, which are assumed to be associated with movable equipment
purchase patterns. The assumption here is that as non-therapy
ancillary costs increase compared with routine costs, the SNF
caseload becomes more complex and would require more movable
equipment. Again, the lack of direct movable equipment purchase data
for SNFs over time required us to use alternative SNF data sources.
The resulting two time series, determined from beds and the ratio of
non-therapy ancillary to routine costs, reflect real capital
purchases of building and fixed equipment and movable equipment over
time, respectively.
To obtain nominal purchases, which are used to determine the
vintage weights for interest, we converted the two real capital
purchase series from 1963 through 1997 determined above to nominal
capital purchase series using their respective price proxies (Boeckh
institutional construction index and PPI for machinery and
equipment). We then combined the two nominal series into one nominal
capital purchase series for 1963 through 1997. Nominal capital
purchases are needed for interest vintage weights to capture the
value of the debt instrument.
Once these capital purchase time series were created for 1963
through 1997, we averaged different periods to obtain an average
capital purchase pattern over time. For building and fixed equipment
we averaged thirteen 23-year periods, for movable equipment we
averaged twenty-six 10-year periods, and for interest we averaged
fourteen 22-year periods. The vintage weight for a given year is
calculated by dividing the capital purchase amount in any given year
by the total amount of purchases during the expected useful life of
the equipment or debt instrument. This methodology was described in
full in the May 12, 1998 Federal Register (63 FR 26252). The
resulting vintage weights for each of these cost categories are
shown in Table A-2.
[[Page 24035]]
Appendix Table A-2.--Vintage Weights for Proposed 1997-Based SNF PPS
Capital-Related Price Proxies
------------------------------------------------------------------------
Building
Year and fixed Movable Interest
equipment equipment
------------------------------------------------------------------------
1................................... 0.082 0.083 0.025
2................................... 0.086 0.088 0.028
3................................... 0.085 0.089 0.031
4................................... 0.083 0.090 0.034
5................................... 0.077 0.091 0.038
6................................... 0.069 0.097 0.042
7................................... 0.063 0.106 0.046
8................................... 0.060 0.111 0.049
9................................... 0.050 0.116 0.051
10.................................. 0.040 0.128 0.051
11.................................. 0.040 .......... 0.052
12.................................. 0.036 .......... 0.053
13.................................. 0.030 .......... 0.051
14.................................. 0.020 .......... 0.050
15.................................. 0.016 .......... 0.049
16.................................. 0.014 .......... 0.048
17.................................. 0.012 .......... 0.049
18.................................. 0.017 .......... 0.050
19.................................. 0.018 .......... 0.051
20.................................. 0.023 .......... 0.051
21.................................. 0.025 .......... 0.049
22.................................. 0.027 .......... 0.051
23.................................. 0.029 .......... ..........
-----------------------------------
Total......................... 1.000 1.000 1.000
------------------------------------------------------------------------
Sources: 1997 SNF Medicare Cost Reports; HCFA, National Health Accounts.
Note: Totals may not sum to 1.000 due to rounding.
All Other: Subcategory weights for the All Other
category were derived using information from two U.S. Department of
Commerce data sources. Weights for the three utilities cost
categories, as well as that for telephone services, were derived
from the 1997 Business Expenditure Survey. Weights for other cost
categories were derived from the 1997 Annual Input-Output tables.
III. Price Proxies Used To Measure Cost Category Growth
A. Wages and Salaries
For measuring price growth in the wages and salaries cost
component of the 1997-based SNF market basket, we propose using the
percentage change in the ECI for wages and salaries for private
nursing homes. The ECI for wages and salaries for private nursing
homes is a fixed-weight index that measures the rate of change in
employee wage rates per hour worked. It measures pure price change
and is not affected by shifts among occupations. Average Hourly
Earnings (AHE) confounds changes in the proportion of different
occupations with changes in earnings levels for a given occupation
and, thus, is an inferior price proxy for our purpose. Even so,
using the AHE for nursing homes has little effect on the percentage
change in the overall proposed 1997 SNF market basket. If we used
the AHE instead of the ECI, the average annual growth rate between
1995 and 2000 would have been higher by 0.1 percentage points per
year. This difference reflects skill mix shifts that would be
reflected in other factors of an update framework as conceptualized
in section IV of the preamble. In addition, while the ECI is for all
nursing homes, not just SNFs, 77 percent of employment in the
nursing home industry in 1998 and 1999 was in SNFs. While this wage
measure includes other nursing homes in addition to skilled nursing
facilities, we believe it adequately reflects the wage changes
occurring in SNFs. It is also the only acceptable statistical source
for nursing home wages that met our criteria of reliability,
timeliness, accessibility, and relevance.
B. Employee Benefits
For measuring price growth in the proposed 1997-based market
basket, the percentage change in the ECI for benefits for private
nursing homes is used. The ECI for benefits for private nursing
homes is also a fixed-weight index that measures pure price change
and is not affected by shifts in occupation. Again, we believe that
the ECI for nursing homes is the most acceptable and appropriate
benefit series available from reliable, timely, accessible, and
relevant statistical sources.
C. All Other Expenses
Nonmedical professional fees: The ECI for compensation
for Private Industry Professional, Technical, and Specialty Workers
is used to measure price changes in nonmedical professional fees.
Electricity: For measuring price change in the
electricity cost category, the PPI for Commercial Electric Power is
used.
Fuels, nonhighway: For measuring price change in the
Fuels, Nonhighway cost category, the PPI for Commercial Natural Gas
is used.
Water and Sewerage: For measuring price change in the
Water and Sewerage cost category, the CPI-U (Consumer Price Index
for All Urban Consumers) for Water and Sewerage is used.
Food-wholesale purchases: For measuring price change in
the Food-wholesale purchases cost category, the PPI for Processed
Foods is used.
Food-retail purchases: For measuring price change in
the Food-retail purchases cost category, the CPI-U for Food Away
From Home is used. This reflects the use of contract food service by
some SNFs.
Pharmaceuticals: For measuring price change in the
Pharmaceuticals cost category, the PPI for Prescription Drugs is
used.
Chemicals: For measuring price change in the Chemicals
cost category, the PPI for Industrial Chemicals is used.
Rubber and Plastics: For measuring price change in the
Rubber and Plastics cost category, the PPI for Rubber and Plastic
Products is used.
Paper Products: For measuring price change in the Paper
Products cost category, the PPI for Converted Paper and Paperboard
is used.
Miscellaneous Products: For measuring price change in
the Miscellaneous Products cost category, the PPI for Finished Goods
less Food and Energy is used. This represents a change from the 1992
SNF market basket, in which the PPI for Finished Goods is used. Both
food and energy are already adequately represented in separate cost
categories and should not also be reflected in this cost category.
Telephone Services: The percentage change in the price
of Telephone Services as measured by the CPI-U is applied to this
component.
Labor-Intensive Services: For measuring price change in
the Labor-Intensive Services cost category, the ECI for Compensation
for Private Service Occupations is used.
Non Labor-Intensive Services: For measuring price
change in the Non Labor-Intensive Services cost category, the CPI-U
for All Items is used.
D. Capital-Related
All capital-related expense categories have the same price
proxies as those used in the 1992-based SNF PPS market basket
described in the May 12, 1998 Federal Register (63 FR 26252). The
price proxies for the SNF capital-related expenses are described
below:
Depreciation--Building and Fixed Equipment: The Boeckh
Institutional Construction Index for unit prices of fixed assets.
Depreciation--Movable Equipment: The PPI for Machinery
and Equipment.
Interest--Government and Nonprofit SNFs: The Average
Yield for Municipal Bonds from the Bond Buyer Index of 20 bonds.
HCFA input price indexes, including this rebased SNF index,
appropriately reflect the rate of change in the price proxy and not
the level of the price proxy. While SNFs may face different interest
rate levels than those included in the Bond Buyer Index, the rate of
change between the two is not significantly different.
Interest--For-profit SNFs: The Average Yield for
Moody's AAA Corporate Bonds. Again, the proposed rebased SNF index
focuses on the rate of change in this interest rate and not the
level of the interest rate.
Other Capital-related Expenses: The CPI-U for
Residential Rent.
Appendix Table A-3.--A Comparison of Price Proxies Used in the 1992-
Based and Proposed 1997-Based Skilled Nursing Facility Market Baskets
------------------------------------------------------------------------
1992-based price 1997-based price
Cost category proxy proxy
------------------------------------------------------------------------
Wages and Salaries.......... ECI for Wages and Same.
Salaries for
Private Nursing
Homes.
Employee Benefits........... ECI for Benefits for Same.
Private Nursing
Homes.
[[Page 24036]]
Nonmedical professional fees ECI for Compensation Same.
for Private
Professional and
Technical Workers.
Electricity................. PPI for Commercial Same.
Electric Power.
Fuels....................... PPI for Commercial Same.
Natural Gas.
Water and sewerage.......... CPI-U for Water and Same.
Sewerage.
Food--Wholesale purchases... PPI--Processed Foods Same.
Food--Retail purchases...... CPI-U--Food Away Same.
From Home.
Pharmaceuticals............. PPI for Prescription Same.
Drugs.
Chemicals................... PPI for Industrial Same.
Chemicals.
Rubber and plastics......... PPI for Rubber and Same.
Plastic Products.
Paper products.............. PPI for Converted Same.
Paper and
Paperboard.
Miscellaneous products...... PPI for Finished PPI for Finished
Goods. Goods less Food and
Energy.
Telephone services.......... CPI-U for Telephone Same.
Services.
Labor-intensive services.... ECI for Compensation Same.
for private service
occupations.
Non labor-intensive services CPI-U for All Items. Same.
Depreciation: Building and Boeckh Institutional Same.
Fixed Equipment. Construction Index.
Depreciation: Movable PPI for Machinery Same.
Equipment. and Equipment.
Interest: Government and Average Yield Same.
Nonprofit SNFs. Municipal Bonds
(Bond Buyer Index-
20 bonds).
Interest: For-profit SNFs... Average Yield Same.
Moody's AAA Bonds.
Other Capital-related CPI-U for Same.
Expenses. Residential Rent.
------------------------------------------------------------------------
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare-Hospital Insurance Program; and No. 93.774, Medicare-
Supplementary Medical Insurance Program)
Dated: March 8, 2001.
Michael McMullan,
Acting Deputy Administrator, Health Care Financing Administration.
Dated: April 23, 2001.
Tommy G. Thompson,
Secretary.
[FR Doc. 01-11560 Filed 5-9-01; 8:45 am]
BILLING CODE 4120-01-P